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San Francisco Public Library 

OOVERNMENT INFORMATION CENTEX 
SAN FRAMQSCO PUBUC UBSARY 

REFERENCE BOOK 

Not to be taken from the Library 



* t 



3 1223 06010 6326 




[All Committees] 

City and County of San Francisco Gov ernment Document Section 

™ ^ »». Main Librarv 

Meeting Minutes dry 



Finance and Labor Committee 

Members: Supervisors Leland Yee, Sue Merman, Tom Ammiano 
Clerk: Mary Red 



O/CQ 



Wednesday, September 20, 2000 



10:00 AM 
Regular Meeting 



City Hall, Room 263 



Members Present: Leland Y. Yee, Sue Bierman, Tom Ammiano. 



Meeting Convened 

The meeting convened at 10:14 a.m. 

REGULAR AGENDA 



DOCUMENTS DEPT. 

SEP 2 5 2000 

SAN FRANCISCO 
PUBLIC LIBRARY 



000635 [Public Utilities Revenue Transfers] 
Supervisors Yee, Bierman 

Ordinance amending Article 7 of Part I of the San Francisco Administrative Code by adding Section 2A.135, 
providing for the appropriation to the Public Utilities Commission of a portion of surplus Hetch Hetchy 
revenues transferred to the General Fund, and providing for periodic increases in the amounts to be returned to 
the Commission. 

(Fiscal impact; Adds Section 2A.135.) 

4/10/00, ASSIGNED UNDER 30 DAY RULE to Finance and Labor Committee, expires on 5/10/2000. 
Continued to September 27, 2000. 
CONTINUED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001488 [Government Funding - Sheriff Department] 
Mayor 

Ordinance appropriating $151,241,017 of proceeds from Certificate of Participation and interest income to 
finance the demolition of old San Bruno Jail No. 3 and the construction of a new jail, providing for improved 
seismic, operational and general security systems for the Sheriff Department for fiscal year 2000-2001. 

(Fiscal impact.) 

8/21/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Michael Hennessey, Sheriff 

AMENDED, AN AMENDMENT OF THE WHOLE BEARING NEW TITLE. 



City and County of San Francisco 



Printed at 12:29 PM on 9/21/00 



Finance and Labor Committee Uirrin^ Minutes September 20, 2000 

Ordinance appropriating $151,241,017 of proceeds from Certificate of Participation and interest income to 
finance the demolition of old San Bruno Jail No. 3 and the construction of a new jail, providing for improved 
seismic, operational and general security systems for the Sheriff Department for fiscal year 2000-2001; placing 
$7,792,000 on reserve. 

(Fiscal impact.) 

RECOMMENDED AS AMENDED by the following vote: 

Ayes: 3 - Yee, Bierman, Ammiano 



001356 [Memorandum of Understanding - MEA] 
Mayor 

Ordinance implementing the provisions of a Memorandum of Understanding between the Municipal 

Executives' Association and the City and County of San Francisco for Bargaining Unit F3 to be effective July 

1, 1999 through June 30, 2001. 

7/24/00, RECEIVED AND ASSIGNED to Finance and Labor Committee 8/3/00 - From Department of Human Resources, substitute file 

copy of the MOU for MEA Fire Chiefs, FY 1999-2001 , reflecting updates lo the Wellness Program provisions. 

9/14/00 - From Department of Human Resources, substitute file copy of the MOU for MEA Fire Chiefs, FY 1999-2001, providing for 

clarification under MOU Section IV B relating to the Training and Education Achievement Pay provision 

Heard in Committee. Speakers: Haney Rose, Budget Analyst; Alice Villagomez, ERD, Human Resource 
Department. 

RECOMMENDED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001191 [Airport Revenue Bonds) 

Resolution approving the issuance of up to $1,000,000,000 additional aggregate principal amount of San 
Francisco International Airport Second Series Revenue Bonds for the purpose of financing or refinancing 
certain infrastructure improvements at San Francisco International Airport, approving the issuance of Airport 
Commission debt obligations pursuant to the Internal Revenue Code of 1986, approving the Ninth 
Supplemental Resolution of the Airport Commission and approving certain related contracts. (Airport 
Commission) 

(Fiscal impact.) 

6/20/00. RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Peter Nardoza, Deputy Director, Airport. 

AMENDED, AN AMENDMENT OF THE WHOLE BEARING NEW TITLE. 

Resolution approving the issuance of up to 5671,165,000 additional aggregate principal amount of San 
Francisco International Airport Second Series Revenue Bonds for the purpose of financing or refinancing 
certain infrastructure improvements at San Francisco International Airport, approving the issuance of Airport 
Commission debt obligations pursuant to the Internal Revenue Code of 1986, approving the Ninth 
Supplemental Resolution of the Airport Commission and approving certain related contracts. (Airport 
Commission) 

(Fiscal impact.) 

RECOMMENDED AS AMENDED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



City and County of San Francisco 2 Printed at 12:29 PM on 9 21 00 



Finance and Labor Committee 



Meeting Minutes 



September 20, 2000 



001265 [CEQA Findings - Emporium Site Development] 
Supervisor Yaki 

Resolution affirming certification of the Yerba Buena Redevelopment Project Area Expansion/Emporium Site 
Development Final Supplemental Environmental Impact Report by the Planning and Agency Commissions 
and adopting environmental findings (and a statement of overriding considerations) pursuant to the California 
Environmental Quality Act and State Guidelines in connection with adoption of the Yerba Buena 
Redevelopment Project Area Expansion/Emporium Site Development Project and various other actions 
necessary to implement the project. 

(Final EIR Certification Date: January 13, 2000; companion measure to Files 992234, 992235, 001265, 
001256, 001257, 001258, 001259, 001266, 001267, 001434.) 

Supervisor Yee dissenting in committee. 

Supervisor Becerril excused from voting in Board. 

7/10/00, ASSIGNED UNDER 30 DAY RULE to Transportation and Land Use Committee, expires on 8/9/2000. 

8/22/00, RECOMMENDED. Heard in committee. Speakers: Emilio Cruz, Director of Economic Development; Bill Carney, 

Redevelopment Agency; Kevin Warner, Senior Development Specialist, Redevelopment Agency; David Jones, Project Developer, Forest 

City; Jim Firth, UFCW Local 101 , Walter Johnson, San Francisco Labor Council; H. Brown; Jim Chappell, SPUR; Anita Hill, Yerba 

Buena Alliance; Doug Comstock, Coalition for San Francisco; Jennifer Clary, San Francisco Tomorrow; Michael Levin; Mary Ann 

Miller, San Francisco Tomorrow; Myles Stephens, San Francisco Black Chamber of Commerce; Gary Jenkins; Charles Range; Alan 

Gibson, Budget Analyst Office. 

Revised versions of Attachment A and Exhibit 2 were received and placed in the file. 
8/22/00, REFERRED to Finance and Labor Committee. 

8/23/00, CONTINUED TO CALL OF THE CHAIR Heard in Committee. Speakers: Julie Brant, Mayor's Office of Economic 
Development; Lloyd Schaegel, Arthur Michel, Market Street Railway; Jim Firth, Local 101; Walter Johnson, S. F. Labor Council; 
Howard Wallace, Local 250; Supervisor Yee, Supervisor Ammiano; Supervisor Bierman. 
8/28/00, CONTINUED. Supervisor Yaki requested this matter be continued to September 1 8, 2000. 
9/18/00, CONTINUED. Supervisor Yaki moved to continue consideration to September 25, 2000. 
Continued to September 27, 2000. 
CONTINUED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



City and County of San Francisco 



Printed at 12:29 PM on 9/21/00 

47608 SFPL: ECONO JRS 



21 



02/15/02 



73 



Finance and Labor Committee 



Meeting Minutes 



September 20, 2000 



001267 [Tax Increment Allocation/Financing Agreement - Emporium Site] 
Supervisor Yaki 

Resolution approving and authorizing a Tax Increment Allocation Pledge Agreement between the City and 
County of San Francisco ("City") and the Redevelopment Agency of the City and County of San Francisco 
("Agency"), under which the City agrees to a pledge by the Agency of a portion of the available non-housing 
tax increment generated by the redevelopment of the project site (specifically including Assessor's Block 3705, 
Lots 9, 10, 12, 13, 14, 15, 17, 18, 33, 38, and 43) in favor of Emporium Development, L.L.C. ("Developer"), a 
subsidiary of Forest City Enterprises, in furtherance of the implementation of the Redevelopment Plan 
amendment for the addition of the Emporium Site Area to the Yerba Buena Center Project Area; approving 
and authorizing a financing agreement and covenant to operate ("Financing Agreement") in connection with 
the Development of the Emporium Site Area; approving an allocation of tax increment for affordable housing 
purposes in excess of the minimum amount required under Redevelopment Law, making elections with respect 
to the allocation of tax increment; adopting findings pursuant to the California Environmental Quality Act; and 
adopting findings that the agreement is consistent with the city's General Plan and Eight Priority Policies of 
city Planning Code Section 101.1. 

(Fiscal impact.) 

7/10/00, ASSIGNED UNDER 30 DAY RULE to Transportation and Land Use Committee, expires on 8/9/2000 

8/1 1/00, TRANSFERRED to Finance and Labor Committee In conjunction with this matter. File 001 265, CEQA findings, will be 

considered by the Finance and Labor Committee on August 23, 2000. 

8/23/00, CONTrNUED TO CALL OF THE CHAIR. Heard in Committee Speakers Julie Brant, Mayor's Office of Economic 

Development; Lloyd Schaegel, Arthur Michel, Market Street Railway; Jim Firth, Local 101 . Walter Johnson, S. F Labor Council, 

Howard Wallace, Local 250, Supervisor Yee, Supervisor Ammiano; Supervisor Bierman. 

Continued to September 27, 2000. 
CONTINUED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001479 [Authorizing expenditure of funds estimated at S558.000 for emergency work at San Mateo Creek] 

Resolution approving the expenditure of funds for the emergency work to design and construct slope and 
stream bank restoration and erosion protection for the San Mateo Creek. (Public Utilities Commission) 
8/9/00, RECEIVED AND ASSIGNED to Finance and Labor Committee 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Chris Nelson, Public Utilities Commission. 
Amended to increase project cost to $558,988.86. 
AMENDED. 

RECOMMENDED AS AMENDED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001429 [Sprint Spectrum Transmitter Lease at the Performing Arts Garage] 

Resolution authorizing and approving a lease of cellular transmitter space at the Performing Arts Garage to 
Sprint Spectrum Limited Partnership. (Real Estate Department) 
8/2/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Harry Quinn; Supervisor Yee; Tom Swarner, 
Sprint; Supervisor Ammiano; Ted Lakey, Deputy City Attorney; Supervisor Bierman Continued to October 4, 
2000. 

CONTINUED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



City and County of San Francisco 



Printed at 12:29 PM on 9/21/00 



Finance and Labor Committee 



Meeting Minutes 



September 20, 2000 



001430 [Sprint Spectrum Transmitter Lease at Pierce Street Garage] 

Resolution authorizing and approving a lease of cellular transmitter space at the Pierce Street Garage to Sprint 
Spectrum Limited Partnership. (Real Estate Department) 
8/2/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Harry Quinn; Supervisor Yee; Tom Swarner, 
Sprint; Supervisor Ammiano; Ted Lakey, Deputy City Attorney; Supervisor Bierman. Continued to October 4, 
2000. 

CONTINUED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001431 [Sprint Spectrum Transmitter Lease at the Fire Station No. 43] 

Resolution authorizing and approving a lease of cellular transmitter space at the Fire Station 43 to Sprint 
Spectrum Limited Partnership. (Real Estate Department) 
8/2/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Harry Quinn; Supervisor Yee; Tom Swarner, 
Sprint; Supervisor Ammiano; Ted Lakey, Deputy City Attorney; Supervisor Bierman. Continued to October 4, 
2000. 

CONTINUED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001432 [Nextel Communications Transmitter Lease at the S.F. General Hospital Garage] 

Resolution authorizing and approving a lease of cellular transmitter space at the San Francisco General 
Hospital Garage to Nextel Communications. (Real Estate Department) 
8/2/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Harry Quinn; Supervisor Yee; Tom Swarner, 
Sprint; Supervisor Ammiano; Ted Lakey, Deputy City Attorney; Supervisor Bierman. Continued to October 4, 
2000. 

CONTINUED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001533 [Reserved Funds, Mayor's Office of Community Development - 2000 CDBG Block Grant Program] 

Hearing to consider release of reserved funds, Mayor's Office of Community Development, in the amount of 
$43,581 (File 000488: Resolution No. 349-00), for Compass Point Nonprofit Services to fund the 5-year 
Homeless Continuum of Care Plan and to provide technical assistance services to MOCD funded nonprofit 
organizations. (Mayor) 

8/23/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Anna Yee, Mayor's Office of Community 
Development. Release of reserved funds in the amount of $43,58 J approved. 
APPROVED AND FILED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



City and County of San Francisco 



Printed at 12:29 PM on 9/21/00 



Finance and Labor Committee 



Meeting Minutes 



September 20, 2000 



001534 [Reserved Funds, Mayor's Office of Community Development - 1998 CDBG Block Grant Programl 

Hearing to consider release of reserved funds, Mayor's Office of Community Development, in the amount of 
$500,000 (File 98-0217: Resolution No. 121-98), to fund the construction of the City College Training Center 
at 1400 Evans Avenue. (Mayor) 

8/23/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Jon Pon, Mayor's Office of Community 
Development. Amended to only release $81, 000. 
APPROVED AND FILED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001523 [Contracting out Airport parking management operations for fiscal year 2000/01) 

Resolution approving the Controller's certification that parking management services for San Francisco 

International Airport can practically be performed by private contractor at a lower cost for the year 

commencing July 1, 2000 than if work were performed by City employees at budgeted levels. (Airport 

Commission) 

8/22/00, RECEIVED AND ASSIGNED to Finance and Labor Committee 

Heard in Committee Speakers: Harvey Rose, Budget Analyst. 

CONTINUED TO CALL OF THE CHAIR by the following vote: 

Ayes: 2 - Yee, Bierman 

Absent: 1 - Ammiano 



001537 [Contracting out Offender Shelter Services) 

Resolution concurring with the Controller's certification that Shelter and Intake for Status Offenders services 
for the Juvenile Probation Department can practically be performed by private contractor at a lower cost 
commending July 1, 2000 than if work were performed by City employees at budgeted levels. (Juvenile 
Probation Department) 

8/23/00, RECEIVED AND ASSIGNED to Finance and Labor Committee 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Lonnie Holmes. Juvenile Probation 
Department. Amended to provide for retroactivity. 
AMENDED. 

Resolution concurring retroactively with the Controller's certification that Shelter and Intake for Status 
Offenders services for the Juvenile Probation Department can practically be performed by private contractor at 
a lower cost commending July 1, 2000 than if work were performed by City employees at budgeted levels. 
(Juvenile Probation Department) 

RECOMMENDED AS AMENDED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001455 [Reserved Funds, Human Services Department! 

Hearing to consider release of reserved funds, Department of Human Services. (Fiscal Year 2000-2001 
Budget), in the amount of $636,000 to fund the Hotel Master Lease Program that will provide and operate a 
supportive hotel for formerly homeless individuals in San Francisco. (Human Services Department) 
8/14/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. Department requests this item be calendared at the September 
6, 2000 meeting. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Will Lightbourne, Executive Director, Human 

Services Department; Supervisor Ammiano. Amended to release $700,000 retroactively 

AMENDED. 



City and County of San Francisco 



Printed at 12:29 PM on 9/21/00 



Finance and Labor Committee 



Meeting Minutes 



September 20, 2000 



Hearing to consider release of reserved funds, Department of Human Services, (Fiscal Year 2000-2001 
Budget), in the amount of $700,000 to fund the Hotel Master Lease Program that will provide and operate a 
supportive hotel for formerly homeless individuals in San Francisco, retroactive to September 1, 2000. 
(Human Services Department) 

Continued to October 4, 2000. 
CONTINUED by the following vote: 

Ayes: 3 - Yee, Bierman, Ammiano 



001437 [San Francisco Affinity Phone Card Program] 
Supervisor Bierman 

Resolution authorizing the Department of Administrative Services to enter into an operating and licensing 
agreement with Pacific Bell Telephone Company, a Northern California company, for the development and 
operation of the San Francisco Affinity Phone Card Program and implementation thereunder. 
8/7/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Kofo Domingo, Department of Administrative 
Services. 

RECOMMENDED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001374 [1660 Mission Proposed Expansion] 
Supervisor Yee 

Hearing to consider the impact of the Department of Building Inspection's proposed expansion of 1660 
Mission Street on staff who will continue to occupy the building, including measures that will be implemented 
to ensure a safe, healthy work environment, sufficient air quality, noise/dust abatement, and adequate open 
space. 

7/24/00, RECEIVED AND ASSIGNED to Public Health and Environment Committee. 
8/14/00, TRANSFERRED to Finance and Labor Committee. 
8/23/00, CONTINUED. Continued to September 20, 2000. 
CONTINUED TO CALL OF THE CHAIR by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



SPECIAL ORDER - 11:30 A.M. 



001507 [Closure of Portions of Fort Funston] 
Supervisor Yee 

Hearing to consider the National Park Services closure of open space at Fort Funston which has resulted in a 
reduction in land available for dog walking and other recreational use by residents. 
8/21/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Supervisor Yee; Lydia Boesch, Attorney: Nathan Winograd, SPCA; Linda 
Shore, Physicist; Nancy Barber; Linda McKay, Fort Funston Dog Walkers Association; Grayce Regan, 
Independent Living Resource Center; Florence Sarrett; Eleanor Vinsant; Alan Grant; Alberta Romanini; 
Christy Cameron; Laura Cavaluzzo; Larry Shockey, Attorney; Linda Horning; Roulhac Gam; Lynn Walker; 
Steven Krefting, National Parks Conservation Assoc; Supervisor Bierman; Supervisor Ammiano; Jennifer 
Finlay; Anne Farrow, SFDOG; Patricia LaCava; Lindsay Kefauver; Vicki Tiernan; George Durgerian, Park 
Ranger; Laura Sweet; Lisa Vatorie; Shelia Mahoney; Ann Alden; Robin Buckley; John Keeting; Eric Finseth, 
Attorney. 

CONTINUED TO CALL OF THE CHAIR by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



City and County of San Francisco 



Printed at 12:29 PM on 9/21/00 



Finance and Labor Committee Meeting Minutes September 20, 2000 

ADJOURNMENT 

Meeting adjourned at 12:53 p.m. 



City and County of San Francisco 8 Printed at 12:29 PM on 9/21/00 



600-261 

•3 
^ I 3.0/00 



CITY AND COUNTY 




[Budget Analyst Report] 

Susan Horn 

Main Library-Govt. Doc. Section 



OF SAN FRANCISCO 



BOARD OF SUPERVISORS 

BUDGET ANALYST 

1390 Market Street, Suite 1025, San Francisco, CA 94102 (415) 554-7642 
FAX (415) 252-0461 



September 14, 2000 



TO: , Finance and Labor Committee 

FROM: Budget Analyst 

SUBJECT: September 20, 2000 Finance and Labor Committee Meeting 

Item 1 - File 00-0635 



Item: 



Description: 



DOCUMENTS DEPT 

SEP t 9 2000 

SAN FRANCISCO 
PUBLIC LIBRARY 



Ordinance Amending Article 7 of the San Francisco 
Administrative Code by adding a new Section 2A1.35, 
providing that, effective in FY 2000-2001, a portion of 
surplus Hetch Hetchy revenues previously transferred to the 
General Fund would be appropriated for PUC capital projects 
instead of retained in the General Fund, and providing for 
annual increases of the percentage of such surplus Hetch 
Hetchy revenues to be retained by the Public Utilities 
Commission for PUC capital projects instead of transferring 
such monies to the General Fund. 

Charter Section 16.103(b)3 provides that the Public Utilities 
Commission, with the concurrence of two-thirds of the Board 
of Supervisors, may authorize the transfer of any portion of 
Hetch Hetchy surplus funds, as defined by the Charter, to 
the General Fund upon making all of the following findings 
of fact and judgment: 

(A) That a surplus exists or is projected to exist after meeting 
the requirements of this section; 



Memo to the Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

REVISED September 15, 2000 
Item 1 - File 00-0635 



(B)That there is no unfunded operating or capital program 
that by its lack of funding could jeopardize health, safety, 
water supply or power production; 

(C)That there is no reasonably foreseeable operating 
contingency that cannot be funded without General Fund 
subsidy (meaning that the unappropriated fund balance 
for the Hetch Hetchy operating fund is sufficient to meet 
any "reasonably foreseeable operating contingency"); and 

(D)That such a transfer of funds in all other respects reflects 
prudent utility practice. 



The proposed ordinance states that whenever surplus Hetch 
Hetchy revenues are transferred to the General Fund, a 
portion of that transfer shall instead be appropriated to the 
PUC for "construction, rehabilitation and repair of potable 
water distribution and wastewater collection facilities under 
the control and authority of the PUC". 

The proposed ordinance further provides that 10 percent of 
the FY 2000-2001 Hetch Hetchy surplus transferred to the 
General Fund shall be reappropriated to the PUC for capital 
projects. 

Lastly, the proposed ordinance states that for all fiscal years 
subsequent to FY 2000-2001, 10 percent of the amount of 
surplus Hetch Hetchy revenues to be transferred to the 
General Fund shall instead by reappropriated to the PUC for 
PUC capital projects and such surplus for the PUC shall 
increase by ten percent each fiscal year. Based on this 
proposed provision, after ten years, beginning in FY 2010- 
2011, all surplus Hetch Hetchy revenues that would have 
otherwise been transferred to the General Fund shall instead 
be appropriated for PUC capital projects including 
construction, rehabilitation and repair of potable water 
distribution and wastewater collection faculties under the 
control and authority of the PUC, with no further Hetch 
Hetchy transfers to the General Fund. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

2 



Memo to the Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

Comments: 1. The FY 2000-2001 budget, as adopted by the Board of 

Supervisors, is based on total General Fund revenue sources 
that include a transfer of Hetch Hetchy surplus revenues to 
the General Fund in the amount of $29,850,000. This Hetch 
Hetchy transfer for FY 2000-2001 is $10,000,000 or 25.1 
percent less than the $39,850,000 transfer for FY 1999-2000. 

If this proposed ordinance is adopted, ten percent of the FY 
2000-2001 $29,850,000 Hetch Hetchy transfer to the General 
Fund, or $2,985,000, must be appropriated to the PUC for 
the PUC capital program. Such a reappropriation of General 
Fund sources would reduce the FY 2000-2001 General Fund 
General Reserve by $2,985,000 from $30,013,905 to 
$27,028,905. The percentage of surplus Hetch Hetchy funds 
to be appropriated to PUC capital programs instead of being 
transferred to the General fund would be increased 10 
percent each year thereafter until FY 2009-2010 when 100 
percent of such surplus funds would be appropriated to the 
PUC capital program instead of being transferred to the 
General Fund. 

2. The decreased FY 2000-2001 Hetch Hetchy surplus 
transfer to the General Fund described in Comment 1 above 
is due to a combination of factors, including reduced revenue 
due to deregulation of the electric utility industry and 
increased expenditures for facilities maintenance and capital 
improvements. Over many years, the Hetch Hetchy surplus 
transfer to the General Fund has been a volatile revenue 
source, subject to a high degree of fluctuation. In dry years, a 
reduced water supply has resulted in reduced hydroelectric 
generation and reduced revenue. Even in wet years, storm 
damage has reduced the Hetch Hetchy surplus transfer to 
the General Fund because of increased faculties maintenance 
expenditures for repair and reconstruction. 

The table below shows the amount of the Hetch Hetchy 
transfers to the General Fund for each of the last ten fiscal 
years, from FY 1991-92 to FY 2000-2001. The table shows 
that the amount of the Hetch Hetchy transfer to the General 
Fund has ranged from a low of $11,000,000 to a high of 
$$45,703,000. The average amount of the Hetch Hetchy 
transfer over the last ten years was $31,023,600. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

3 



Memo to the Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



Hetch Hetchy Equity Transfers to the General Fund 

Source: Annual Appropriation Ordinance 



Hetch Hetchy 



Fiscal Year 


Transfer to General Fund 


2000-2001 


$29,850,000 


1999-2000 


39,850,000 


1998-99 


42,703,000 


1997-98 


45,703,000 


1996-97 


37,703,000 


1995-96 


30,165,000 


1994-95 


25,462,000 


1993-94 


30,800,000 


1992-93 


17,000,000 


1991-92 


11,000,000 


Average: 


S3 1,023,600 


Minimum: 


511,000,000 


Maximum 


$45,703,000 



3. The PUC has previously reported to the Board of 
Supervisors that, based on a draft 1998 12 year capital plan, 
spending requirements for the PUC's Water and Sewer 
enterprises amount to approximately $3,500,000,000. 
Funding for most such capital spending will require the 
expenditure of currently authorized revenue bonds and the 
authorization of new revenue bonds. 

To the extent that PUC available funding is increased in the 
future through a reduction in Hetch Hetchy funds 
transferred to the General Fund, the need for future capital 
project funding through the issuance of revenue bonds can be 
reduced or, alternatively, increased capital projects can be 
completed. 

However, the Budget Analyst notes that a reduction in 
General Fund funding sources through the gradual decrease, 
and eventual elimination, of the Hetch Hetchy transfer, will 
require either reduced General Fund spending, new General 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

4 



Memo to the Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



Fund revenue or some combination of the two in order to 
balance the General Fund budget in future fiscal years. 

The table below illustrates the amount of the Hetch Hetchy 
transfer that would not be transferred to the General Fund 
and instead be retained by to the PUC for appropriation to 
the PUC capital program, assuming that the transfer amount 
remains constant over the next ten years at FY 2000-2001 
levels. As noted above, the amount of the transfer can vary 
significantly. 







Percentage to be 




Cumulative Amount to 




Assumed 


Appropriated for PUC 


Amount to be 


be Appropriated for 




Amount of Hetch Capital Projects Instead 


Appropriated for 


PUC Capital Projects 




Hetchy Transfer 


of Being Retained by 


PUC Capital 


and Not Retained by 


Fiscal Year 


to General Fund 1 


the General Fund 


Projects 


the General Fund 


2000 -01 


$ 29,850,000 


10% 


$ 2,985,000 


- 


2001 -02 


29,850,000 


20% 


5,970,000 


$ 8,955,000 


2002 -03 


29,850,000 


30% 


8,955,000 


17,910,000 


2003 -04 


29,850,000 


40% 


11,940,000 


29,850,000 


2004 -05 


29,850,000 


50% 


14,925,000 


44,775,000 


2005 -06 


29,850,000 


60% 


17,910,000 


62,685,000 


2006 -07 


29,850,000 


70% 


20,895,000 


83,580,000 


2007 -08 


29,850,000 


80% 


23,880,000 


107,460,000 


2008 -09 


29,850,000 


90% 


26,865,000 


134,325,000 


2009-10 


29,850,000 


100% 


29,850,000 


164,175,000 



Recommendation: 



Approval of the proposed ordinance is a policy matter for the 
Board of Supervisors. 



1 Amount of Hetch Hetchy Transfer to General Fund is assumed to be constant beginning with the 
transfer budgeted for FY 2000-01. The actual funds available for transfer to the General Fund can 
vary significantly as discussed in Comment 2. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

5 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

Item2-File00-1488 



Department: 



Item: 



Sheriff 

Mayor's Office of Public Finance (MOPF) 
Department of Public Works (DPW) 
City Attorney 

Ordinance appropriating $151,241,017 in proceeds from the sale of 
Certificates of Participation and interest income to finance the 
demolition of San Bruno Jail No. 3 and the construction of a new 
jail, providing for improved seismic, operational and general 
security systems fir the Sheriffs Department. 



Amount: 

Source of 
Funds: 



Description: 



$151,241,017 

Sale of Certificates of Participation 
Projected Interest Income 
Total 



$137,235,000 

14.006.017 

$151,241,017 



* The par amount of the Certificates of Participation was 
formerly estimated at $170,310,000 (see below). 

In March of 2000, the Board of Supervisors adopted an Ordinance 
(File 00-0088) authorizing the Sheriffs Department, the 
Department of Public Works, the City Architect, the City Attorney's 
Office and the Mayor's Office of Public Finance to negotiate and 
enter into a design-build/finance contract for the County Jail No. 3 
Replacement Project. 

In May of 2000, the Board of Supervisors adopted an Ordinance 
(File 0778) authorizing the Department of Public Works to enter 
into a design-build contract with Morse Diesel International Inc. for 
the County Jail No. 3 Replacement Project. The contract provided 
for a maximum construction cost for the project not exceeding 
$115,000,000. This project maximum of SI 15,000,000 was for the 
design/build contract only and did not include other City costs, such 
as DPW contract administration, related to the project that totaled 
$17,200,582. The total cost of the replacement project was set at 
$132,200,582, not including issuance costs for the Certificates of 
Participation, capitalized interest 1 and costs incurred by the City 



1 During the construction of the project, the City cannot make lease payments on the facility until 
the City has beneficial use of the new Jail. Therefore, interest payments during the period of 
construction must be paid from the proceeds of the sale of the COPs. 

BOARD OF SUPERVISORS 

BUDGET ANALYST 

6 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

Attorney, Controller and tbe Mayor's Office of Public Finance. 
Including these latter costs, total project and related costs are 
$151,241,017. 

Also in May of 2000, the Board of Supervisors adopted a Resolution 
(File 00-0783) approving the execution and delivery of Certificates 
of Participation in an amount not to exceed $170,310,000 to finance 
a new maximum security jail facility to replace the existing San 
Bruno Jail No. 3. This resolution also authorized the City to execute 
an Asset Transfer in order to reduce the amount of money that 
must be borrowed in order to fund the project. 

Because of a) favorable market conditions and lower than 
anticipated interest rates, b) the use of the Asset Transfer approved 
by the Board of Supervisors to reduce capitalized interest and 
reduce credit risk and, c) the ability of the City to secure a debt 
service surety policy (i.e. bond insurance) in place of a funded cash 
reserve, the City was able to substantially reduce the amount of 
Certificates of Participation (COPs) that needed to be sold in order 
to fund the project. Instead of a COPs issuance of $170,310,000, the 
MOPF executed the sale of $137,235,000 in COPs to fund the 
project, or $33,075,000 less than the amount authorized by the 
Board of Supervisors. 

Budget: A summary budget for the proposed San Bruno Jail No. 3 

Replacement Project appropriation is shown below. 



Buildings, Structures and Improvements 


$ 132,200,582 


Debt Service (Capitalized Interest) 


12,810,466 


COP Issuance Costs 




2,635,845 


Original Issue Discount 




2,773,351 


Services of City Attorney 




606,694 


Services of Controller 




15,000 


Services of MOPF 




191,135 


Other Current Expenditures 


• Contingency 


7.944 


Total 




$151,241,017 


BOARD OF SUPERVISORS 





BUDGET ANALYST 

7 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



As noted above, the construction cost of $132,200,582 is comprised 
of $115,000,000 for the design/build contract with Morse Diesel 
International Inc. and other City costs related to the project of 
$17,200,582. Attachment 1 provides further details of the 
$115,000,000 for the Morse Diesel design/build contract as previously 
approved by the Board of Supervisors. Attachment 2, provided by James 
Cheng, DPW Project Manager, provides further details for the $17,200,582 
in additional City costs. 

According to Ms. Monique Moyer, Director of Finance for the 
Mayor's Office of Public Finance, the amount of $12,810,466 
budgeted for debt service (capitalized interest) represents interest 
only payments that must be made on the COPs debt during the 
approximately 38 month period between the issuance of the COPs 
and the completion of construction. The DPW anticipates issuance 
of a notice to proceed in October of 2000 and project completion in 
36 months (or September of 2003). 

The proposed appropriation ordinance specifies Certificate of 
Participation issuance costs of $2,635,845. However, Ms. Moyer 
indicates that the correct figure for actual issuance costs is 
$2,632,460 (see Comment 2). Details of the cost of issuance for the 
Certificates of Participation as provided by Ms. Moyer are shown in 
Attachment 3. 

The proposed appropriation ordinance specifies Bond Discount (or 
Original Issue Discount) costs of $2,773,351. This discount is the 
purchase price to investors in the COPs which is deducted from the 
par amount of the issuance. 

Remaining items budgeted in the proposed appropriation ordinance 
include reimbursement of costs incurred by City Departments 
($606,694 for the City Attorney, $15,000 for the Controller and 
$191,135 for the Mayor's Office of Public Finance) and a 
contingency amount of $7,944. 

According to Ms. Moyer, actual reimbursement for the City 
Attorney should be $615,500 or $8,806 more than the $606,694 
budgeted. Attachment 4 from the City Attorney provides details on 
charges to the San Bruno Jail No. 3 replacement project in the 
amount of $609,582 which were incurred through August 22, 2000. 
According to Ms. Martie Moore of the City Attorney's Office, the 
$5,918 balance payable to the City Attorney ($615,500 less 
BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

$609,582 detailed in Attachment 4) represents additional staff time 
subsequent to the sale of the Certificates of Participation. 

Costs of $15,000 for the Controller are for anticipated expenditure 
control and auditing costs. 

The $191,135 in expenses for the MOPF are detailed as follows 
according to Ms. Moyer. 

Hourly 
Staff Rate Hours Cost 

Director of Public Finance $ 93.00 1,820 $169,260 

Public Finance Manager $ 65.00 250 16,250 

Public Finance Staff $ 45.00 125 5.625 

Total $191,135 



Comments: 1. Attachment 2 provided by Mr. Cheng provides DPWs detailed 
City project costs of $17,200,582 for the following: 

• Utilization of an existing project contractor, selected on a 
competitive basis, for peer review services in the amount of 
$500,000; 

• Detailed staffing for Materials Testing ($350,000); Inspection 
and Construction Administration ($3,769,219); Hazardous 
Materials Mitigation and Environmental Monitoring Issues 
($500,000); Project Management ($1,831,363); and, 
construction management ($500,000). 

Attachment 2 also includes a $6,000,000 "Regulatory Fund and 
City Contingency" budget item for environmental costs and other 
contingencies during the project. At this time, Mr. Cheng is unable 
to provide full expenditure details for the $6,000,000 Regulatory 
Fund and City Contingency. However, Mr. Cheng explains that 
during the initial phase of the project, DPW requests that 
$1,700,000 of the $6,000,000 be released so that such funds would 
be immediately available for unanticipated expenditures. The 
Budget Analyst therefore recommends that $4,300,000 of the 
$6,000,000 Regulatory Fund and City Contingency be reserved. 

Attachment 2 includes a total of $3,250,000 for Demolition of the 
existing San Bruno Jail No. 3. Since demolition of the existing Jail 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

9 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

No. 3 facility will not be performed until the new Jail is completed, 
the Budget Analyst recommends that all of the $3,250,000 for 
demolition be reserved. 

Attachment 2 includes $250,000 for anticipated City Attorney costs 
during the construction period. As of the writing of this report, the 
City Attorney's Office is unable to provide an estimate of such 
future costs and the Budget Analyst recommends that the 
$250,000 for City Attorney expenditures be placed on reserve. 

Lastly, Attachment 2 includes Sheriffs Department costs of 
$250,000. Attachment 5, provided by Ms. Jean Mariani of the 
Sheriffs Department, provides a detailed estimate of the Sheriffs 
estimated total project related costs of $1,562,107, including 
$270,959 for FY 2000-2001. According to Mr. Cheng, the Sheriffs 
Department's project costs in excess of $250,000 will be paid from 
the Regulatory Fund and City Contingency set aside of $6,000,000. 

The Budget Analyst notes that the Sheriffs estimated cost of 
$270,959 for FY 2000-01 shown in Attachment 5 includes nine 
months funding for project related security that will not be 
required until actual construction begins in approximately April of 
2001 and a lump sum amount of $40,000 for preparation of a 
Emergency Response Plan for the new jail facility that will not be 
required until the new jail is completed. Therefore, the Budget 
Analyst recommends that the $250,000 for the Sheriffs project 
related costs be reduced by $42,000 to $208,000, representing 
anticipated costs for FY* 2000-01, that the $42,000 be placed on 
reserve. The Budget Analyst further recommends that the Sheriff 
include future requests for project funding from reserved project 
funds in their annual budgets during the term of the Jail No. 3 
Replacement Project. Therefore, the Budget Analyst recommends 
total reserves of $7,842,000. 

2. As explained above, the amount specified in the proposed 
appropriation ordinance for Cost of Issuance should be amended to 
reduce such expenditures by $3,385 from $2,635,845 to $2,632,460. 

3. As explained above, the City Attorney cost reimbursement 
amount specified in the proposed appropriation ordinance should be 
amended to increase such expenditures by $8,806 from $606,694 to 
$615,500. Further, the contingency amount in the proposed 
appropriation ordinance should be reduced by $5,421 from $7,944 to 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

10 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

$2,523 in order to reconcile to the total appropriation of 
$151,241,017. 

4. A total of $7,842,000 of the $17,200,582 in City project related 
costs should be placed on reserve as explained in Comment 4, 
above. The amounts to be reserved should be as follows: 



Item 


Reserve Amount 


$6,000,000 Regulatory and 




City Contingency 


$4,300,000 


$3,250,000 for Demolition 




of old Jail No. 3 


3,250,000 


$250,000 for City Attorney Costs 


250,000 


$250,000 for Sheriffs Costs * 


42.000 


Total 


$7,842,000 



* Future project expenditures for the Sheriff should be annually appropriated in 
the Sheriffs budget using the project Regulatory and City Contingency as a 
source of funds. 

Recommendations: 1. Amend the proposed appropriation ordinance to reduce the Cost 
of Issuance by $3,385 from $2,635,845 to $2,632,460 as explained in 
Comment 2, above. 

2. Increase the City Attorney cost reimbursement amount by 
$8,806 from $606,694 to $615,500 and reduce the contingency 
amount in the proposed appropriation ordinance by $5,421 from 
$7,944 to $2,523 as explained in Comment 3, above. 

3. Reserve $7,842,000 of the $17,200,582 in City project related 
costs as explained in Comment 4, above. 

4. Approve the proposed appropriation ordinance as amended. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

11 



Attachment No. 1 



San Bruno County Jail #3 - Construction Budget 



Description 


Budget 


A. Subcontractors 




Division 1 - General Conditions 


220.004 


Division 2 - Site work 


8.149.944 


Division 3 Foundations 


11.486.113 


Division 4 - Masonry 


4.166.071 


Division 5 - Metals 


3.718.677 


Division 6 - Wood & plastic 


1.299.779 


Division 7 - Thermo/Moisture Protection 


1.983.991 


Division 8 - Doors & windows 


8.644.106 


Division 9 - Finishes 


4.239.384 


Division 10 - Soecialties 


1.539.363 


Oivision 1 1 - Equicment 


2.058.552 


Division 12 - Furnishings 





Oivision 13 - Soecial Construction 


5.349.968 


Division 1 4 - Conveyinq systems 


1.274.517 


Division 15 - Mechanical 


14.846.9S0 


Division 16 - Electrical 


13.664.574 


Subcontractor Bends 


826.619 


Total Subcontractors Cost 


S33.488.652 


B. Contingency 




Bid Contingency 


4.012.500 


Develooer's Contincenc/ 


4.012.500 


Total Contingency 


53.025.000 


C. Permits/Tax 




Permits 


525.000 


Gross Receiot Tax 


350.000 


Total Permits/Tax Cost 


S37 5.000 


D. Bonds/Insurance 




Bond 


1.050.000 


Builders Risk Insurance 


222.348 


Professional Liability Insurance 


199.500 


General Liability 


1.039.500 


Pre-cons:ruc!ion Costs 


500.00C 


Total Bonds/Insurance Cost 


S3.01 1.348 


E. Design ' 


KMO Desicn 7.200.000 


7bfa/ Design Cost S7£00,0C0 


F. MOr 


General Conditions/Fee 12.40C.GCC 


Total MDI Cos: S1Z4O0.0C0 


Total Contract Cost 


S115,000,000 



Total design cost i MDI CCFee is 21.21% ol actual subcontractors cost. The aeveicper will not oe entitled fo any design t 
MCI CCFee (21.21%) on me developer's contingency work, permits/tax and Ponds/insurance. Fnal design cost i ViCI GCFee 
will Pe adjusted when the total subcontract casts are UnaBzed as per contract documents. 



12 



City Project Costs Attachment 2- Page 1 of 2 

San Bruno Jail Replacement - City Costs 

1 Peer Review (Estimated): Provide design review during planning/design phase $500,000 
to insure compliance with program requirements. This task will be performed by 

consultants with expertise in prison design. 

Beverly Prior Architects and their subconsultants was the team that assisted DPW 
and SFSD in the development of the request for proposal, programing and design 
criteria for this project. We intend to retain their services to provide the peer review 
during the planning, design and construction phases because of their famiiarity and 
their knowledge relative to this project. Their proposal for providing the peer review 
services will be faxed to you. 

2 Testing, Inspection & Contract Administration: 

Materials Testing (Estimated): Provide testing of materials such as soils, concrete, $350,000 

reinforcing steel, welding and other testing specified in the contract. 







Cost/Hour 


# of Hrs 


Subtotal 


5206 


Associate Engineer 


90.75 


40 


3,630 


6318 


Construction Inspector 


85.30 


510 


43,503 


5305 


Materials Testing Tech 


62.30 


4,340 


270,382 


Consult 


Welding Inspection 


L/S 


- 


32,485 



Inspection: Provide inspection and construction administration services to insure $3,769,219 

work is in compliance with contract documents. 





Class 


5208 


Civil Engineer 


5206 


Associate Engineer 


5204 


Assistant Engineer 


5238 


Assoc. Elect. Engr 


5254 


Assoc. Mech. Engr 


5268 


Architect 


6348 


Electrical Inspector 


6342 


Plumbing Inspector 


1446 


Secretary II 



Cost/Hour 


# of Hrs 


Subtotal 


105.05 


6,500 


682,825 


90.75 


6,000 


544,500 


77.55 


5,000 


387,750 


90.75 


3,500 


317,625 


90.75 


3,500 


317,625 


106.70 


4,000 


426,800 


96.11 


3,750 


360,422 


96.11 


3,750 


360,422 


59.40 


6,250 


371,250 



3 Site Hazardous Materials Mitigation & Environmental Issues Monitoring: $500,000 

Class Cost/Hour # of Hrs Subtotal 



9398 Division Manager 
2478 Section Manager 
6318 Construction Inspector 
6137 Industrial Hygienist 
Consult & Lab Costs (Pre-constr.) 
Consult & Lab Costs (Construction) 



94.92 


84 


7,973 


90.48 


200 


18,096 


85.30 


1,924 


164,117 


72.42 


1,068 


77,345 


L/S 


- 


97,500 


L/S 


- 


135,000 



Project Management: Provide project management and technical support services $1,831,363 

to insure project is completed on schedule and within budget. 

Class Cost/Hour # of Hrs Subtotal 

5508 Project Manager IV 152.90 7,000 1,070,300 

5504 Project Manager II 112.75 6,750 761,063 



DPW 
13 



City Project Costs 



Attachment 2- Page 2 of 2 



Construction Management - as needed scheduling & estimating: 

Class Cost7Hour # of Hrs Subtotal 

5208 Civil Engineer - Scheduling 105.05 1,440 151,272 

5206 Assoc Engineer - Estimating 90.75 1,915 173.786 

5204 Assist Engineer - Estimating 77.55 2,255 174,875 



$500,000 



6 Regulatory fund & City Contingency : 

The additional contingency funds are required for potential hazardous materials and 
environmental mitigation measures. Hazardous materials and environmental mitigations are 
not included in the scope of work under the contract with the developer, Morse Diesel 
International (MDI) and it is the responsibility of the City. 

Although DPW and MDI purposely revised the design of the new facility to avoid the 
wetlands and the frog pond located adjacent to the project site, however the developer will 
still be working in and around the wetlands and the frog pond area. DPW is currently 
negotiating with the Army Corp of Engineers and the Department of Fish, Wildlife and 
Games to obtain the necessary permits for the City to go forward with the project. This 
contingency fund release request is to cover the anticipated costs of the mitigation 
measures mandated by the permitting agencies. 

In addition, based on our preliminary findings, there are imported fills and debris deposits at 
various locations within the project site. These fills and other deposits could potentially 
contain hazardous or contaminated materials. This contingency fund release request is also 
to cover the costs of potential hazardous material mitigation measures. 

Since this is a design/build project, it is anticipated that the developer will commence with 
actual construction approximately six months after the "Notice to Proceed". Therefore, we 
need a portion of the contingency funds to be available in order to address these potential 
issues expeditiously to avoid delays to the project. 

DPW requests the release of $1 ,700,000 of the 56,000,000 Regulatory and Contingency 
Reserve. 



$6,000,000 



7 Demolition (Reserve) : 

Hazardous Materials Mitigation (Estimated) 
Demo Existing County Jail 



$3,250,000 



1,750,000 
1.500,000 



Other City Departments: 
City Attorney's Office 
Sheriffs Department 



$500,000 



250.000 
250,000 



Total 



$17,200,581 



DPW 
14 



Attachment 3 



City & County of SaaFrancisco 

CertificateVoflPafticipatidn (San Bruno Jail Replacement Project) 



9/14/00 



Estimated Costs of Issuance 







Estimate 


Fee Basis 


BOND INSURER (AMBAC ASSURANCE) 








Debt service payment insurance 


$ 


1,085,442 


Actual Fee 


Reserve fund surety policy 


$ 


249,138 


Actual Fee 


UNDERWRITER'S DISCOUNT 


S 


897,516 




Lehman Brothers 








Redwood Securities 








EJ de la Rosa 








Salomon Smith Barney 








Chapman & Company 









Hourly Rate # of Hours Total 



FINANCIAL ADVISOR FEES 

CO FINANCIAL ADVISORS 
Stephens, McCarthy, Kuenzel & Caldwell 

BOND COUNSEL FEES 

CO BOND COUNSELS 
Jones Hall Hill & White 
Law Offices of Lisa Quateman 
Fees 

RATING AGENCY FEES 

Standard & Poors 

Moodys 

Fitch 

PRINTING 

Printing of Preliminary Official Statement 
and Official Statements (POS/OS) 

ADVERTISING 

TRUSTEE 

Wells Fargo Bank 

APPRAISAL & SITE ASSESSMENT 

PROPERTY INSURANCE 

TITLE INSURANCE 

CONTINGENCY 

TOTAL COST OF ISSUANCE 



75,000 Maximum Fee Amount 
1,000 Out-of-Pocket 



$ 195.00 385 $75,075.00 



72,500 Flat Fee Contingent 
Upon Issuance of Bonds 
49,500 

28,000 

5,000 77,500 

76,000 Actual Fee (estimated 576,000) 



30,000 Actual Fee (estimated $30,000) 



$ 4,500 

S 

$ 19,000 Fee from 8/31/00 to 5/1/01 

$ 111,500 Actual Fee (estimated $111,150) 

$ 5,865 

$ 2,632,460.00 



est: $ 30,000 5 32,936 
$ 36,000 
$ 10,000 



15 



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16 



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17 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

Item 3 -File 00-1356 



Department: 



Item: 



Description: 



Department of Human Resources (DHR) 
Fire Department 

Ordinance implementing a Memorandum of 
Understanding (MOU) between the Municipal Executives' 
Association (MEA) and the City for Bargaining Unit F3, 
for the two-year period retroactively from July 1, 1999 
through June 30, 2001. 

The proposed ordinance would approve a Memorandum of 
Understanding (MOU) between the Municipal Executives' 
Association (MEA) and the City for Bargaining Unit F3. 
Bargaining Unit F3 covers the following uniform exempt 
management classifications in the Fire Department, 
comprising a total of 9 employees: 



Position 


Number of 
Employees 


0140 Chief of Fire Department 


1 


0150 Deputy Chief of Department 


2 


H-51 Assistant Deputy Chief II 


5 


H-53 Emergency Medical Services Chief 


1 


Total 


9 



The previous MOU with MEA for Bargaining Unit F3 
went into effect July 1, 1992 and expired June 30, 1999. 
The proposed MOU would be effective retroactively to 
July 1, 1999 and expire on June 30, 2001 (See Comments 
Nos. 2 and 3). The major changes in the proposed MOU 
from the prior MOU with Bargaining Unit F3 include the 
following: 

Work Schedules 

The subject MOU maintains from the prior MOU the 
regular work day of 8 hours (within a 24-hour period), and 
a work week of five days (within a 7-day period), for a 
total work week of 40 hours, for covered employees not 
assigned to fire suppression. 

For covered employees who are assigned to fire 
suppression, the subject MOU specifies that employees 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



18 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



classified as H-51 Assistant Deputy Chief II and H-53 
Emergency Medical Service Chief, a regular work day 
consists of a 24-hour shift and regular work week consists 
of 48-hour average work week, on an alternating three 
shift schedule and a 21-day tour of duty. This schedule for 
fire suppression staff is consistent with current practices. 
According to Ms. Debra Ward of the Fire Department, 
none of the nine permanent employees covered by the 
subject MOU are currently assigned to 24-hour fire 
suppression shifts. 

Wages 

Effective July 1, 1999, all classifications covered by the 
subject MOU will receive salary increases of 5.5 percent. 
Effective July 1, 2000, all covered classifications will 
receive a salary increase of an additional 5.5 percent, for a 
total salary increase of 11 percent over the course of the 
two-year agreement (See Comment No. 2). 

In addition to these salary increases, the H-51 Assistant 
Deputy Chief II and the H-53 Emergency Medical 
Services Chief will receive internal salary adjustments 
intended to provide a minimum 5 percent supervisory pay 
differential between these two classes over the class H-50 
Assistant Chief. Such internal salary adjustments will 
include one percent, effective July 1, 1999, and an 
additional 4 percent, effective July 1, 2000, for a total 5 
percent increase over the two-year term of the MOU. This 
total 5 percent internal salary adjustment would be in 
addition to the total 11 percent salary increase over the 
two-year agreement discussed above (see table under 
Comment No. 5 below for summary). 

Training and Education Achievement Pay 

All four classifications covering nine employees under the 
subject MOU will receive a additional 3 percent of their 
base wage, effective July 1, 1999, and an additional 3 
percent of their base wage effective July 1, 2000, for a 
total increase of 6 percent over the two-year agreement, to 
recognize their advanced training and educational 
achievement. According to Ms. Alice Villagomez of the 
Department of Human Resources (DHR), this additional 
pay to recognize training and education is consistent with 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

19 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



other uniform ranks within the Fire Department and the 
Police Department. 

The additional Training and Education Achievement Pay 
will be considered part of an employee's salary for the 
purpose of computing retirement benefits and 
contributions. Under the previous MOU, covered classes 
did not receive Training and Education Achievement Pay 
(see Comment No. 4 below). 

Administrative Assignment Pay 

Employees in classifications H-51 Assistant Deputy Chief 
II and H-53 Emergency Medical Services Chief, who are 
assigned by the Chief of the Department to a 40-hour 
work week, will receive additional compensation of $225 
biweekly, or approximately $550 per month for 
Administrative Assignment Pay. This additional 
compensation would not be included in the calculation of 
retirement benefits from the Employees Retirement 
System or any other benefits that are a function of 
percentage of salary. 

Currently, H-51 Assistant Deputy Chief II and H-53 
Emergency Medical Services Chief do not receive any 
monetary compensation in addition to their salary for 
their administrative positions. However, H-50 Assistant 
Chiefs, not covered by the subject bargaining unit or 
MOU, do receive a compensation of $225 bi-weekly. 

According to Ms. Villagomez, in exchange for this 
Administrative Assignment Pay, the subject MOU 
reduces the number of Executive Leave days received by 
the H-51 Assistant Deputy Chief II and H-53 Emergency 
Medical Services Chief (see Executive Leave section 
below). 

Executive Leave 

Employees in classifications 0140 Chief of Fire and 0150 
Deputy Chief of Department will continue to receive 5 
days of paid Executive Leave per fiscal year. Up to five 
days of unused Executive Leave may be carried over into 
the next fiscal year. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

20 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



Employees in classifications H-51 Assistant Deputy Chief 
II and H-53 Emergency Medical Services Chief will have 
their Executive Leave reduced under the subject MOU, 
from 5 days of paid leave per fiscal year to 2 days of paid 
leave per fiscal year. Up to 2 days of unused Executive 
Leave may be carried over into the next fiscal year. 

For all employees covered by the subject MOU, Executive 
leave may only be taken as paid time off and cannot be 
cashed out at the end of the year or at retirement. 

Compensatory Time Off 

The subject MOU continues with the same Compensatory 
Time Off policy in effect since July 1, 1996, which 
prohibits covered employees from earning and accruing 
compensatory time off. Currently, the City must pay new 
appointees to the classifications covered by the subject 
MOU for any compensatory time the employee has 
accumulated in his or her previous position, at the current 
rate of pay of their former position. In addition, the 
subject MOU now provides that if the City determines 
that it is unable to compensate a new appointee for 
accrued compensatory time off due to budgetary 
limitations in a certain fiscal year, the City may postpone 
paying the new appointee that portion of compensatory 
time off pay until any succeeding fiscal year. Should the 
City exercise this option, the new appointee would then be 
compensated at a later date, at the rate of pay of the 
employee's former class in effect at the time the employee 
receives the compensation payment. 

Severance Pay 

Under a new provision, employees covered by the subject 
MOU are to receive a 30-day notice prior to their final 
day, if involuntarily removed or released from their 
positions. If the employee receives less than 30 days 
notice, the City will pay to the employee for each day not 
informed short of 30 days. 

In addition, if the City is removing or releasing from 
employment an employee who has 10 or more years of 
City Service the employee will also receive one month's 
severance pay in exchange for a release signed by the 
employee and the MEA of all claims arising under this 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

21 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



Agreement that the employee or MEA may have against 
the City. This release would also include a wavier of any 
rights the employee may have to return to City 
employment. This release would not affect claims or 
rights the employee may have independent of the subject 
agreement, such as those covered by State or Federal law. 
According to Ms. Villagomez, the employee would have 
the option of whether or not to sign this release of claims. 

If the City returns a represented employee involuntarily 
to a permanent classification, that employee may elect to 
separate from the City and receive one month's severance 
pay in exchange for a release signed by the employee and 
MEA of any and all claims arising under this Agreement, 
as discussed above. 

According to Ms. Villagomez, the prior MOU with 
Bargaining Unit F3 did not provide for severance pay. Ms. 
Villagomez advises that this provision is identical to 
severance pay provisions for other managers covered 
under the MEA MOU for miscellaneous employees. Ms. 
Villagomez advises that the MOU for Police Department 
management does not contain a provision that addresses 
severance pay. 

Holiday Premium Pay for Fire Suppression 

Effective July 1, 2000, employees in classifications H-51 
Assistant Deputy Chief II and H-53 Emergency Medical 
Services Chief, who are assigned to 24-hour suppression 
shifts, shall be paid a holiday premium per pay period 
equal to six percent of their base salary, excluding other 
premiums. Covered employees who utilize sick pay on any 
of the days specified as holidays in the MOU will not 
receive the 6 percent holiday premium in that pay period. 

According to Ms. Villagomez, the Hobday Pay provided to 
covered employees in the proposed MOU is the same 
Hobday Pay provided to other uniform personnel assigned 
to suppression. 

According to Ms. Villagomez, the additional Hobday Pay 
will be considered part of an employee's salary for the 
purpose of computing retirement benefits and 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

22 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



contributions, to the same extent such payments are 
considered for other ranks in the Fire Department. 

Employees covered by the subject MOU who are assigned 
to 8-hour shifts, rather than 24-hour fire suppression 
shifts, do not have to work on holidays and do not receive 
Hobday Pay. 

Wellness Program 

The Wellness Program, already provided to other uniform 
ranks in the Fire Department, will be extended to 
Bargaining Unit F3. However, the Wellness Program for 
Bargaining Unit F3 differs in two principal ways: (1) the 
Program requires a higher number of accrued hours in 
the core sick leave bank (600 rather than the 360 required 
for Firefighters); and, (2) the Program sets a group 
eligibility maximum cap for all covered employees for sick 
leave usage. Therefore, once a core account of 600 hours of 
sick leave has been accrued for each covered employee, 
suppression employees can cash out 60 hours and non- 
suppression employees can cash out 50 hours of sick leave 
hours under the following conditions: 

Suppression Members (those working 24-hour shifts) : 
If the average annual sick leave for ail Suppression 
Members in Bargaining Unit F3 is not more than 
three 12-hour watches (36 hours) in a fiscal year, and 
if an individual uses 36 hours or less of sick leave in a 
fiscal year, then he or she will be entitled to cash out a 
total of 60 hours of accrued sick leave during that 
same fiscal year. 

Non-Suppression Members (those working a 40-hour 
work week) : If the average annual sick leave for all 
Non-Suppression Members in Bargaining Unit F3 is 
not more than 24 hours in a fiscal year, and if an 
individual uses 24 hours or less of sick leave in a fiscal 
year, then he or she will be entitled to cash out a total 
of 50 hours of accrued sick leave during that same 
fiscal year. 

Previously, there was no provision for cashing out sick 
leave hours. Ms. Villagomez advises that employees can 
accumulate up to 6 months of sick leave, as set forth 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

23 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



under the sick leave provisions of the Civil Service Rules. 
According to Ms. Villagomez, the MOU covering Police 
Department management contains a similar Wellness 
Program, however, the Police Department program has 
fewer requirements on the accrual of sick leave hours. 

Health Benefits 

The proposed MOU will provide full medical premium 
coverage for employees with no dependents and up to 
$225 or 75 percent of the cost of Kaiser's Medical 
premium costs, whichever is greater, for each employee 
plus two dependents. The Department of Human 
Resources estimates that as of July 1, 1999, this provision 
will result in an increase of $23 per month per employee 
dependent, since previously, the MOUs provided that the 
City contributed a flat $225 per month towards dependent 
health coverage. In addition, except for unpaid Family 
Care Leave, the City will cease to pay for health coverage 
after 12 weeks of unpaid leave status. 

Under the subject MOU, the City will cease payments for 
any and all contributions for employees' health and dental 
benefits for employees who remain on unpaid status, with 
the exception of approved sick leave, workers' 
compensation, Family Medical Leave Act leave or 
California Family Rights Act leave. According to Ms. 
Villagomez, the health benefits provided in the subject 
MOU are consistent with those provided to Police 
Department management. 

Health and Safety 

Voluntary prostrate and breast cancer screening would be 
offered and paid for by the Fire Department to covered 
employees over 40 years of age through the Department's 
Health Check Program. Confidentiality of all medical 
information will be maintained. Previously, no such 
screening program existed in the MOU. This benefit is 
consistent with the voluntary prostate and breast cancer 
screening provided to other uniform employees in the Fire 
Department. According to Ms. Villagomez, Police 
Department management has different physical fitness 
and wellness programs. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

2k 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



• Retirement Benefits 

Tbe City will continue to pay for the entire employee's 
share of retirement contributions to the Employee 
Retirement System, in addition to the amounts the 
Charter requires the City to contribute. According to Ms. 
Villagomez, the contributions for retirement provided in 
the subject MOU are consistent with those provided to 
Police Department management. 

Comments: 1. The proposed ordinance would be effective beginning 

July 1, 1999 through June 30, 2001. 

2. According to Ms. Villagomez, the City began 
negotiating with the ME A over the subject MOU in 
February of 1999 and came to an agreement in July of 
2000, 12 months after the prior MOU expired on June 30, 
1999. Mr. Villagomez advises that since the subject MOU 
was to go into effect on July 1, 1999, covered employees 
will be paid retroactively for all pay increases under the 
subject MOU once the MOU has been approved by the 
Board of Supervisors and the Mayor. Covered employees 
have been serving under the terms of the previous MOU 
since the MOU expired on June 30, 1999. 

3. As stated previously, the subject MOU goes into effect 
on July 1, 1999 and expires June 30, 2001. Ms. 
Villagomez reports that the proposed MOU would extend 
for two years, instead of the six-year term of the previous 
MOU with MEA Bargaining Unit F3, to coincide with the 
expiration of the two other major public safety employee 
MOUs (i.e., the Police and Sheriff Departments), as well 
as expiration of the MOUs covering other uniform ranks 
at the Fire Department, all of which extend through June 
30, 2001. 

4. The Budget Analyst notes that tbe Training and 
Education Achievement Pay, which would provide a three 
percent increase of base pay as of July 1, 1999 and 
another three percent increase, for a total of six percent, 
as of July 1, 2000, results in an increase at an 
accelerating rate, since such premiums will be based on a 
percentage of salaries rather than a fixed amount. Under 
the previous MOU, covered classes did not receive 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

9S 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



Training and Education Achievement Pay. Furthermore, 
including such Pay Premiums in computing retirement 
benefits will further increase the Fire Department's 
retirement costs for the City. Ms. Villagomez reports that 
such policies are comparable to those included in the 
current Police Officers Association MOU and MEA Police 
MOU. 

5. In summary, the proposed MOU with MEA Bargaining 
Unit F3 covers nine uniform exempt management 
positions at the Fire Department in four different 
classifications: (1) 0140 Chief of Fire, (2) 0150 Deputy 
Chief of Fire Department, (3) H-51 Assistant Deputy 
Chief II, and, (4) H-53 Emergency Medical Services Chief. 
Under the proposed MOU, these four classifications and 
nine positions will receive: (1) two additional salary 
increases of 5.5 percent each on July 1, 1999 and July 1. 
2000, for a total increase of 11 percent; (2) two pay 
increases for Training and Education Achievement Pay of 
3 percent each on July 1, 1999 and July 1, 2000, for a 
total increase of 6 percent, (3) therefore providing a total 
compounded salary increase of 17.7 percent over the two- 
year MOU period. (See table below for summary). The full 
amount of this increase in base salary will be used to 
compute retirement benefits for employees. 

In addition, classes H-51 Assistant Deputy Chief II and 
H-53 Emergency Medical Services Chief will receive 
internal salary adjustments of one percent on July 1, 1999 
and 4 percent on July 1, 2000, for a total 5 percent 
increase over the two-year term of the MOU. As shown in 
the table below, when these internal salary adjustments 
are added to the salary increases discussed above, the H- 
51 Assistant Deputy Chief II and H-53 Emergency 
Medical Services Chief will receive a total salary increase 
of 9.5 percent on July 1, 1999 and an additional 12.5 
percent on July 1, 2000, for a total compounded increase 
of 23.2 percent over the two-year MOU period. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

26 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



Pay Increases 


FY 1999 
Increase 


FY 2000 
Increase 


Total 
Over 2 
Years 


Compounded 

Total 
Over 2 Years 


Salary Increase 


5.5 % 


5.5 % 


11% 




Training and Education 
Achievement Pay 


3% 


3% 


6% 


Total Increase for: : . 
all Covered Employees 


- 8.5% 


8.5% - 


; 17% . 


-17.7% 


Internal Salary Adjustment for 
Classes H-51 and H-53 


1% 


4% 


5% 




Total Increase for 
Classes H-51 and H-53 


9.5% 


1 12.5% ;■ 


""' 22% %? 


'23.2%" : 



For example, a 0140 Chief of the Fire Department who 
earned $151,928 annually as of June 30, 1999 would earn 
$178,853 annually as of July 1, 2000, an increase of 
$26,925 or 17.7 percent over the two-years of the MOU 
period. Another example would be an H-51 Assistant 
Deputy Chief II who earned $103,930 annually as of June 
30, 1999 would earn $128,028 annually as of July 1, 2000, 
an increase of $24,098 or 23.2 percent over the two-year 
MOU period. 

Employees in classifications H-51 Assistant Deputy Chief 
II and H-53 Emergency Medical Services Chief, who are 
assigned by the Chief of the Department to a 40-hour 
work week, will also receive additional Administrative 
Pay compensation of $225 biweekly, or approximately 
$550 per month. This additional compensation will not be 
included in the calculation of retirement benefits. 
Effective July 1, 2000, employees in classifications H-51 
Assistant Deputy Chief II and H-53 Emergency Medical 
Services Chief, who are assigned to 24-hour suppression, 
shall be paid a 6 percent holiday premium per pay period, 
excluding other premiums, as holiday compensation in 
lieu of receiving days off on holidays. Since the subject 
MOU was to go into effect on July 1, 1999, covered 
employees will be paid retroactively for all pay increases 
under the subject MOU once the MOU has been approved 
by the Board of Supervisors and the Mayor. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



27 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

6. As shown in the Attachment, the Controller's Office 
estimates the cumulative cost of implementing the 
proposed MOU to be $422,528 over the two-year period 
from July 1, 1999 through June 30, 2001. The Budget 
Analyst notes that the assumptions used by the 
Controller's Office to estimate the incremental costs of the 
proposed MOU appear reasonable, although actual costs 
may vary. As stated in Comment No. 2 above, the 
proposed MOU will take effect retroactively, beginning 
July 1, 1999, and therefore, the City will reimburse 
covered employees for pay increases under the subject 
MOU, according to Ms. Villagomez. According to Mr. 
Matthew Hymel of the Controller's Office, the additional 
costs of the proposed MOU will be funded through the 
Salary and Benefits Reserve funded in the FY 2000-2001 
budget, which presently has a balance of $16,472,036. 

Recommendation: Approval of the proposed ordinance is a policy matter for 

the Board of Supervisors. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

28 




Attachment, Page 1 of 
g| CITY AMD C QUgjT X O* SAJN gKAgl ciM-U m r xv ..e.Uf i xii cuii i iwjj^x. 

Edward Harringtc 
Control! 

Matthew H. Hym 
Chief Assistant Contrail 



September 12, 2000 

Ms. Gloria L. Yaung, Clerk of the Board 
Board of Supervisors 
1 Dr. Carlton B. Goodlett Place 
San. Francisco, C A 94102 

RE: Memorandum ofUnderstanriTng between Municipal Executives' Association (Fire Chiefs) 

and the Ciry and County of San Francisco. 
File No. 001356 

Dear Ms. Young, 

In accordance with Ordinance 92-94, 1 am sufamimng a cost analysis of an amendment to the Memorandum 
of Understanding (MOU) between Municipal Executives' Association (MEA) Fire Cb^ and the City and 
County of San Francisco. The MOU covers the period July 1, 1999 through June 30, 2001, and affects 
approximately 9 employees with a salary base of appr o ximate ly 51,087,680. " 

Based on our analysis, the amendment will result in estimated incremental costs of approximately 
SI 08,062 in FY 1999-2000, and $314,466 in FY 2000-2001. Including wage-related fringe benefits, the 
amendment will result in a cost increase above the base salary amount of approximately 10% in FY 1999- 
2000 and 18% in FY 2000-2001. Since we are in FY 2000-01, the 1999-2000 cost will be paid as a 
retroactive payment. Please see Attachment A for specific cost estimates. 

If you have any additional questions or concerns please contact me at 554-7500 or Peg Stevenson of my 

staff at 554-7522. 



Sincerely, 



ward M/>iaiTington "^T 



Controller 



Alice Villagome2, ERD 
Harvey Rose, Budget Analyst 



US-554-7500 Cry RiB ■ 1 Dr. Cutom B. Goodka Ptacr • Room 314 • S»n Jnnaeo C\ WlC-loX FaX 415-5S- 



29 



Attachment, Page 2 of 2 



Attachment A 
Fire Chief* Locals 352 
Estimated Costa t: 39-2000 to 2001 
Controller's Office 

Annual Incremental Cagta/fSavjptqt 

Unltwide Provisions: 
Wag* Increase 

5.5% on July 1, 19D9 

5.5% on July 1.2000 

Wellness Program 

Training and Education Achievement Pay 

3% on July 1. 199S- 

Additional 3% on Jury 1. 20C0 (1) 

Dependant Health Care 

Class-Specific Provisions: 

Internal Salary Adjustments 

Assistant Deputy Chief II and Emergency Medical Services Chief 1% July 1, 1SS9 

Assistant Deputy Chief II and Emercer.cy Medical Services Chief 4% July 1, 2000 

Administrative Assignment Pay 

Assistant Deputy Chief II and Emergency Medical Services Chief 

Compensation of |225 biweekly 

Reduction of ejuieutivs Leavo from 5 days to 2 days 

Holiday Premium Pay for Fire Suppression 
6% on July 1,2000 

Wage-Related Fringe Increases 



F' 1999-?000 FY 2000-2001 



553,322 



32.330 



56.577 



8.032 



553.113 
13.197 

34.425 

3.888 

527.757 

35.100 
(7.S8S) 

19.732 
16.782 



Total Estimated nerementaJ CosS 

Annual Amount Above 1S98-1999 Lave! 

Cumulative Totil Above 1998-1999 Provisions 

Incremental C©Lt % of Salary Base 

(1) The language regarding training and educarjonai achievement pay was uncear 
in the City and Union contract Cur cost esamatB is based en the Emcicyea 
Relations D'r.isiorrs (E3D) pcsibcn that the intent ar.d imclementancn cf the 
provision wciid be a 3% increase bcth years of the contrac 



'ca.zez 



206.4O* 



108.062 



zs*% 



314,465 
$422. £23 
17.SS% 



30 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



Item 4 - File 00-1191 



Note: 



File No. 00-1191 is a request for Board of Supervisors 
approval to issue up to $1,000,000,000 in Airport Revenue 
Bonds to fund infrastructure improvements at the 
Airport. The Airport will introduce an Amendment of the 
Whole to the subject resolution, requesting approval to 
issue up to $671,165,000 in Airport Revenue Bonds to 
fund such improvements. This report is based on the 
Amendment of the Whole. 



Department: 
Item: 



Amount: 
Source of Funds: 



Airport 

Resolution (a) approving the issuance of up to 
$671,165,000 additional aggregate principal amount of 
San Francisco International Airport Second Series 
Revenue Bonds for the purpose of financing or refinancing 
certain infrastructure improvements at San Francisco 
International Airport; (b) approving the issuance of 
Airport Commission Debt Obligations pursuant to the 
Internal Revenue Code; (c) approving the Ninth 
Supplemental Resolution of the Airport Commission; and 
(d) approving certain related contracts. 

Not to exceed $671,165,000 

San Francisco International Airport Second Series 
Revenue Bonds 



Description: 



The proposed resolution, as amended, would (a) approve a 
$671,165,000 increase in the authorized amount of 
Airport Second Series Revenue Bonds, for a total amount 
of $1,056,165,000, ($385,000,000 previously approved by 
the Board of Supervisors 1 plus $671,165,000); and (b) 
authorize the Airport to substitute one or more surety 
policies (bond insurance policies) in place of cash balances 
currently on deposit in bond reserve accounts, thereby 
freeing up cash to be used for the proposed Airport capital 
projects. 



1 The Board of Supervisors approved issuance of $220,000,000 in revenue bonds in June of 1997 (file 
no. 170-97-6) and $165,000,000 in March of 1999 (file no. 99-0206). In addition to the $1,056,165,000 
in Second Series Revenue Bonds ($385,000,000 in previously issued bonds, plus $671,165,000 which 
is the subject of this resolution), which will be used for Airport infrastructure projects, the Board of 
Supervisors has approved $2.85 billion in bonds for the Airport's Master Plan construction projects. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



31 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



Section 4.115 of the Charter grants the Airport 
Commission (the "Airport") the authority to issue revenue 
bonds for Airport-related purposes, subject to the 
approval of the Board of Supervisors. Section 2.62 of the 
Administrative Code provides that such revenue bonds 
shall bear an interest rate not to exceed that rate which 
may be set by the Airport, subject to the approval of the 
Board of Supervisors. 

Comments: 1. The proposed $671,165,000 in new revenue bonds 

would be used to finance Airport capital improvement 
projects other than near-term Master Plan Projects and to 
pay the costs of issuance, including redemption 
premiums, and other related costs. The Airport 
Commission has approved overall project costs in the 
amount of $621,120,062 for repair and improvement of 
Airport infrastructure. As noted in Attachment I, 
provided by the Airport, total costs are expected to be 
$779,468,000, which includes project costs ($621,120,062), 
capitalized interest on the bonds which are issued 
($93,248,000), debt service reserve ($55,032,000) and debt 
issuance costs ($10,067,938). Sources of funding totaling 
$779,468,000 include Airport Revenue Bond proceeds 
requested by this resolution ($671,165,000), projected 
interest earnings on the bond proceeds ($30,303,000), and 
proceeds from the sale of Airport commercial paper and 
variable rate demand notes ($78,000,000). According to 
Mr. Marcus Perro of the Airport, the Airport would repay 
$78,000,000 in commercial paper and variable rate 
demand notes through Airport operating revenues or 
through refunding of the commercial paper and variable 
rate demand notes into long-term debt 2 . 

2. Attachment II, provided by the Airport, contains the 
list of proposed capital improvement projects. The 
planned capital improvement projects total $621,120,062 
and include (a) "Master Plan Phase B" projects, which are 



2 On July 20, 1998, the Board of Supervisors approved a total of $1.4 billion in Refunding Bonds 
through December 31, 2001 (Resolution 583-98) of which $400,000,000 was in connection with the 
Airport's Commercial Paper Program. In March of 1999 the Board of Supervisors authorized the 
extension of the issuance of such Refunding Bonds for 16 months, from December 31, 2001 through 
April 30, 2003 (File 99-0206). According to Mr. Perro, authority to refund S78.000.000 in commercial 
paper is included in that authorization. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

32 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



a group of projects approved in 1992 as part of the 
ongoing near-term Master Plan Construction Program; (b) 
airfield improvements; (c) environmental projects, such as 
San Francisco Bay wetlands creation and mitigation 
projects 3 and hazardous waste disposal and remediation; 
(d) revenue maintenance and generation projects, such as 
the expansion of space currently occupied by the Crab Pot 
restaurant and the Book, Inc. store in the North 
Terminal, development of a new vehicle parking lot, and 
modifications for a new ground transportation center 
located inside the terminal garage; (e) safety and security 
improvements, such as American with Disabilities Act 
(ADA) accommodations and fire protection projects; (f) 
service improvements, such as escalator and utilities 
upgrades; and (g) master plan activation projects, such as 
design and implementation of a fiber optic 
telecommunications transmission system for the new 
International Terminal Complex, and Airport tenant 
utilities and infrastructure projects. According to the 
Airport, the Airport will submit a supplemental 
appropriation request to expend the bond proceeds on the 
above projects. 

The capital projects to be financed by the subject revenue 
bonds were reviewed and recommended by the Capital 
Improvement Advisory Committee (CIAC) on August 29, 
2000. 

3. The Airport has proposed a maximum interest rate of 
12 percent in accordance with State bond regulations. 
Such bonds would be exempt from Federal income tax in 
accordance with the Federal Internal Revenue Code. 
Additionally, the Airport has set a maximum interest rate 
of 15 percent on any revenue bonds which are not deemed 
to be exempt from Federal income tax. The subject bonds 
would qualify for tax-exempt status under the Internal 
Revenue Code if the bonds are issued by or on behalf of a 
governmental entity. However, if the bonds substantially 
benefit private business, they are not eligible for tax- 
exempt status. The interest rate of 15 percent for tax- 
eligible bonds provides for the higher interest cost of such 



3 Wetlands creation and enhancement are part of a plan to mitigate loss of wetlands acreage due to 
Master Plan projects and airfield safety improvements at the Airport. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

33 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



bonds. Mr. Perro states that the subject bonds would be 
tax-exempt. 

4. Mr. Perro advises that the total debt service for the 
additional $671,165,000 in Airport Infrastructure Bonds 
over a 30-year period would be approximately 
$1,625,349,895, based on an estimated interest rate of 6.5 
percent. The average annual debt service would be 
$54,330,927 and total interest payments over 30 years 
would be $954, 184,895. 4 According to Mr. Perro, the 
actual interest rate on the Airport's outstanding debt is 
currently 5.64 percent. As noted in Attachment I, the 
estimated interest rates at which the bonds would be sold 
would range from 6.5 percent to 7.5 percent. 

5. According to Mr. Perro, financing costs, which can not 
exceed 2 percent of the bond issue in accordance with the 
Internal Revenue Code, would be no greater than 
$13,423,300. Financing costs include the cost of issuance, 
such as bond rating agency fees, printing, consultant fees, 
underwriter's discount, and bond counsel fees. 

6. Mr. Perro states that debt service costs would be paid 
through an increase in Airline landing fees and terminal 
rent payments. According to Mr. Perro, the projected 
Airline cost per enplanement 5 through 2006 is $14.04 per 
enplanement. Mr. Perro advises that debt service costs 
for $671,165,000 in Airport Revenue Bonds would 
increase the Airline cost per enplanement by $0.65, or 
4.63 percent, to $14.69 per enplanement. 

7. Approval of the proposed resolution would authorize 
the Airport to substitute one or more surety policies for 
cash amounts currently on deposit in bond reserve 
accounts, making cash now held in reserve available to be 
used for the proposed Airport capital projects. According 
to Mr. Perro, the reserve for Airport revenue bonds is 
currently $267,466,763, of which $186,366,763 is cash and 



4 The total debt service amount of $1,625,349,895 over a 30 year period is based upon principal and 
interest payments for bond proceeds in the amount of 5671.165,000. Total interest payments in the 
amount of $954,184,895 reflect the different amounts and date of issuance of the three bond issues 
and the different interest rates for each issue. The annual debt service amount of $54,330,927 is an 
adjusted average for the three separate issues of the subject revenue bonds. 

5 Enplanement is defined as one passenger embarking on an airplane. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

34 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

permitted investments. Mr. Perro states that, upon 
issuance of an additional $671,165,000 in Airport revenue 
bonds, the Airport would be required to place an 
additional $55,032,000 in reserve 6 . Mr. Perro advises 
that the Airport has not yet determined what amount of 
cash reserves would be replaced by the surety policies. 
However, Mr. Perro states that the Airport "anticipates 
replacing all outstanding cash-funded reserves with 
surety policies if the Airport financial advisors determine 
it to be economically advantageous based on the cost of 
the surety policies versus interest earnings on the cash 
funded reserve." According to Mr. Perro, the Airport has 
not yet determined the cost of the surety policy or what 
interest earnings would be foregone by removing cash 
from the reserves. Mr. Perro states that a Request for 
Proposal would be issued and a financial agent would be 
selected based on the bid which represents the lowest cost 
to the Airport. According to Mr. Perro, such cost would 
range from a low of 1.25 percent to a high of 4.0 percent of 
the reserve amount covered by the surety policy. 

8. Mr. Perro states that the Airport will issue the bonds 
totaling $671,165,000 in three installments: 
approximately $272,547,000 in December of 2000 7 , 
approximately $197,539,000 in the Summer of 2001, and 
approximately $201,079,000 in the Winter of 2001. The 
Airport must submit a supplemental appropriation 
request to the Board of Supervisors to expend bond 
proceeds. Attachment III is a list of the proposed projects 
which will be funded by the proceeds from the first issue 
of Airport Revenue bonds. According to the Airport, 
construction on these projects is expected to begin in early 
2001. 

Recommendation: Approval of the proposed resolution is a policy matter for 

the Board of Supervisors. 



6 According to Mr. Perro, the required reserve amount is equal to the maximum annual debt service 
cost for all Airport revenue bonds and that the issuance of $671,165,000 in additional revenue bonds 
would result in maximum estimated annual debt service of $55,032,000. Therefore, the required 
reserve amount would increase by $55,032,000, for a total amount of $322,498,673. 

7 The issue of bonds in the approximate amount of $272,547,000 includes $249,477,103 in project 
costs plus an additional estimated $23,069,897 in capitalized interest, debt service costs, and 
issuance costs. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

35 



./— - 



SEP. 6.2000 3:00PM 



Attachment I 



Sources: 



Uses: 



Attachment 1 
Project Sources and Uses 



GARB Proceeds (a) 
Interest Earnings (b) 
Commercial Paper/VRDNS (c) 



Project Costs 
Capitalized Interest (d) 
Debt Service Reserve 
Issuance Costs (e) 



$671,165,000 
30,303,000 
78,000,000 

$779,468,000 

S62 1,1 20,062 
93,248,000 
55,032,000 
10.067.938 

$779,468,000 



(a) Assuming all-in true interest cost rates (by bond issue) as follows: 

December 2000 6.5% 

Summer 2001 7.0% 

Winter 2001 7.5% 

(b) On the Construction Fund and capitali2cd interest. Assuming interest rate of 5.5% per year. 

(c) Assuming financing rate (including remarketing and LOC provider) of 4.58% 

(d) Assuming interest is capitalized 2 years per issue. 

(e) Assuming costs of issuance of 1.5% per issue. 

For detailed budget, see Ninth Supplemental Project Description attachment. 



M:\LHarrlj\PFC App\Fite *0019»1 - C1AC Reportdo* 1 1 



36 



Attachment II 
Page 1 of 3 



San Francisco International Airport 




Projects Supporting Amended Ninth Supplemental Resolution 




| 


Project Cost 


Plan for the Repair and Improvement of Airport Infrastructure 






Master Plan, Phase B 








5450 ! Central Terminal and Boarding Area D Remodeling 


$35,000,000 






TBD : AirTrain Guideway from Lot D to Lot DD 


56,500,000 






TBD \ Boarding Area B Apron HazMat Site Abatement 


22,500,000 




TBD | Boarding Area B HazMat and Demolition 


16,300,000 




TBD | Boarding Area B Remodel Design 


20,000,000 






TBD 


Public Parking Structure on Lot DD - Phase II 


45,000,000 




;TBD 


Truck Cargo Building at North Field 


10,000,000 




iTBD 


Two Stations for AirTrain Extension 


7,000,000 




1 








Total Master Plan, Phase B 


$212,300,000 












Airfield Improvements 






[1527 


Global Positioning System Preparation 


$750,000 




|1896 


Field Lighting Raceway System Improvement 


23,099,970 




13107 


Runways 28L and 28R EastEnd Hold Apron Widening 


10,000,000 




J3555 


Airfield Low Visibility Improvements 


5,526,500 




|3570 


Taxiway Repair and Construction 


3,000,000 




|3827 


Field Lighting Control System Upgrade 


735,000 


|4078 


Taxiway Repair and Construction 


3,000,000 


|4237 


Airfield Drainage Repairs, Phase B 


1,000,000 


i 


5530E 


Taxiways A and B Realignment, East Phase 


8,500,000 




5531AR 


Taxiway H and M Realignment 


2,641,781 
















Total Airfield Improvements 


$58,253,251 




1 




Environmental 




3301 ' Chlorofluorocarbon (CFC) Conversion of Central Plant Chiller 


$1,251,672 


(3307 Hazardous Waste Disposal and Remediation 


726,000 


1 3590 South Detention Pond Improvement 


2,839,000 




3799 


Sewage Pump Stations Upgrade 


736,000 


i 


4034 


Solid Waste Compactors and Improvements 


435,750 






4111 


Airport Drainage System Improvement, Phase B 


3,000,000 






4253 


HARD Wetland Enhancement Project 


1,300,000 




4254 Outer Bair Island 


5,625,000 




4255 |West of Bayshore Wetland Enhancement Project 


500,000 


TBD Mitigation Requirements 


4,469,000 








Total Environmental 


$20,882,422 


i 


Revenue Maintenance and Generation 


399 1 North Terminal Secure Concourse, Phase II 


$12,000,000 


3996AR Lot DD Parking Lot Surface Paving 


10,000,000 


14079 Terminal Garage GTC Improvement 


10,000,000 


600 1 . 1 [Site Planning and Traffic Studies for Multi-Modal Center on Lot DD 


158,901 


TBD I Automatic Pay Stations 


2,000,000 


!TBD Boarding Area D Specialized Equipment from Remodel 


25,000,000 



x:\Capital Plan 00\SFO9lhSuppApp.xls.xls-9th Supp Revised 8_31 

9/12/00 I 

37 



Attachment II 









Page 2 of ! 


3 








Project Cost 






TBD 


Construction of Alternative Point of Entry (APOE) Building No. 2 


2,490,000 






TBD 


License Plate Imaging System 


2,241,000 






TBD 


Telecommunications Infrastructure Development - North Terminal Area 


1,867,500 






TBD 


Telecommunications Infrastructure Development - South Terminal Area 


1,867,500 
















Total Revenue Maintenance and Generation 


S67.624.901 










Safety and Security 






12349 


Americans with Disabilities Act (ADA), Phase II 


$4,043,000 






2349 


Americans with Disabilities Act (ADA), Phase III 


6,225,000 






3311C 


Airport Perimeter Fence Installation 


368,000 






3836 


West Field Security Checkpoint 


1,500,000 






3869A-F 


North Terminal Fire Protection, Mechanical, Lighting and Ceilings 


21,000,000 






4064 


South McDonnell Road Roadway Lighting 


1,000,000 






4073 


North Terminal Seismic Retrofit 


2,000,000 






4077 


South Field Check Point 


1,500,000 






4094 


Pavement Repair and Construction 


1,000,000 






4095 


Pavement Repair and Construction 


1,000,000 






4098 


Concrete Repair and Construction 


500,000 




14101 


Airport Structures Seismic Improvement, Phase A 


10,000,000 




|4108 


Airport Roadway Resurfacing 


4,000,000 




|4116 


Airport Facilities Fire Protection Improvement 


587,045 




J4157 


North Terminal Natural Gas Houseline Upgrade 


316,250 




14319 


Boston Whaler — Quick Response for Water Rescue 


120,000 






L5903C 


South McDonnell Road Realignment 


2,500,000 






TBD 


Air, Rescue and Fire Fighting (ARFF) Crash and Rescue Vehicle 


700,000 






TBD 


Airfield Rescue Vehicle 


110,000 






TBD 


Airport Facilities Fire Protection and Plumbing Improvement 


1,000,000 






TBD 


Airport Wide EMCS 


6,000,000 






TBD 


Electrical Recircuiting of Critical Circuits, Terminals 


12,450,000 




TBD 


Emergency Call Boxes in West Field Garage 


62,250 




ITBD 


Emergency Generators for Airport Computer Rooms, Various Locations 


1,245,000 




: TBD 


Fireboat 


500,000 




TBD 


New Construction of Emergency Response Facility (ERF) 2 Addition 


575,000 




'TBD 


Oshkosh T-3000 ARFF 


490,000 




TBD 


Replace Composite Roofs on Elevator Cores and Stairwells 


229,200 








Total Safety 


and Security 


S8 1.020.745 




\ Service Improvt 


•ments 




12084 


Water Service Improvement - Northeast Field 


5919,000 


12360 


Electrical Power Distribution System Upgrade 


3,675,000 


3463 


South Terminal Escalators, Moving Walks and Elevators Upgrade 


963,000 


:3464 


Central Terminal Escalators. Moving Walks and Elevators Upgrade 


963,000 


3465 


North Terminal Escalators and Moving Walks Upgrade 


681.000 


3800 


Airport Underground Utilities Repairs 


376,000 


1 '3828 


1 Electrical Power Distribution System Upgrade 


4.000.000 


3829 


Electrical Station BP Upgrade 


6.235.000 


3842 


North Terminal B/A-E/F and Hub Connector Carpet Replacement 


1,700.000 


3851 


Central Terminal Construction of New HVAC Facilities 


6,000.000 


3872 


North Terminal Renovanons - Future Improvements 


5.000.000 



x:\Capital Plan 00\SFO9thSuppApp xls.xls-9th Supp Revised 8_31 
9/12/00 



38 



Attachment II 









Page 3 


of 3 










Project Cost 






3886 


Purchase of Asphalt Milling Machine 


550,000 






4033 


Pavement Repair and Construction (formerly CT 3412) 


1,148,000 






4069 


Information Kiosks 


266,375 






4093 


Pavement Repair and Construction (formerly CT 3310) 


1,275,000 






4160 


North Terminal Dynamic and Static Signage 


2,000,000 






4166 


North Terminal Mechanical Rooms/Equipment Construction/Retrofit 7,500,000 






4201 


West Field Road Improvements 


560,000 




4216 


As-Needed General Construction 


1,867,500 




4219 


Install Optical Character Recognition Capability 


1,036,420 




4220R 


West Field Road (R-6) Electrical Improvements 


360,000 


1 


4231 


Airfield Drainage Repairs, Phase A 


468,000 




TBD 


AirTrain System from Lot D to Lot DD 


43,000,000 




TBD 


Central Garage Public Address System Replacement 


249,000 




TBD 


Delta Airlines Relocation to Boarding Area D 


10,000,000 




TBD 


Electrical Construction/Repairs, FY 2002 


498,000 




TBD 


Install Pneumatic Tube System in Central Garage 


400,000 




TBD 


Install Public Address System in IT Garages 


249,000 






TBD 


Install Variable Message Signs (VMS) 


154,500 






TBD 


Multi-User Flight Information Display 


883,000 






TBD 


Purchase and Install "Pay-on-Foot" Parking Payment System 


1,324,500 






TBD 


Purchase of Jet Vactor 


300,000 






TBD 


Remodel Central Garage Offices 


224,100 






TBD 


Rental Car Center Service Improvements 


17,000,000 




TBD 


Replace Garage Level 5 Doors and Install Weather Canopies 199,200 






TBD 


Replace/Modernize Static Signage in Central Garage 


124,500 




JTBD Telecommunications Construction/Repairs, FY 2001 


510,450 






TBD 


Telecommunications Construction/Repairs, FY 2002 


510,450 






TBD 


Tenant Electrical Panelboards 


747,000 






TBD 


Upgrade Valet Customer Waiting Area in Central Garage 


80,190 
















Total Service Improvements 


$123,997,185 












Facilities Integration 






4279 (Facilities Integration, Signage Transitional Support 


$393,750 




4313 'Facilities Integration, Airport Informational Mapping System 


175,000 






5515C Facilities Integration, Telecommunications Transmission System 


2,900,000 






Various 


Facilities Integration, IT Tenant Utilities and Infrastructure 


53,572,808 










Total Facilities Integration $57,04 1,558 






1 


IGRAND TOTAL S621. 120,062 



x:\Capital Plan 00\SFO9thSuppApp.xls. xls— 9th Supp Revised 8_31 
9/12/00 



39 



SEP. b.iildWk) 3: 16PM 



Attacrvaerit 111 



San Francisco International Airport 

9th Supplemental Appropriation Projects 

First Bond Sale 



Project Project Title 

2349 Americans with Disabilities Act (ADA), Phase III 

3465 North Terminal Escalators and Moving Walks Upgrade 

3555 Airfield Low Visibility Improvements 

3570 Taxiway Repair and Construction 

3590 South Detention Pond Improvement 

3827 Field Lighting Control System Upgrade 

3842 North Terminal B/A-E/F and Hub Connector Carpet Replac 

3872 North Terminal Renovations • Future Improvements 

3991 North Terminal Secure Concourse, Phase II 

4064 South McDonnell Road Roadway Lighting 

4077 South Field Check Point 

4079 Terminal Garage GTC Improvement 

4094 Pavement Repair and Construction 

4108 Airport Roadway Resurfacing 

4157 North Terminal Natural Gas Houseline Upgrade 

4160 North Terminal Dynamic ana Static Signage 

4219 Install Optical Character Recognition Capability 

4319 Boston Whaler - Quick Response for Water Rescue 

5450 Central Terminal and Boarding Area D Remodeling 

5903C South McDonnell Road Realignment 

TBD Air, Rescue and Fire Fighting (ARFF) Crash and Rescue Veh 

TED Airfield Rescue Vehicle 

TBD Airport Facilities Fire Protection and Plumbing Improveme 

TBD Airport Wide EMCS 

TBD AirTrain Guideway from Lot D to Lot DD 

TBD AirTrain System from Lot D to Lot DD 

TBD Automatic Pay Stations 

TBD Boarding Area D Specialized Equipment from Remodel 

TBD Central Garage Pub.ic Address System Replacement 

TBD Construction of Alternative Point of Entry (APOE) Building 

TBD Emergency Call Boxes in West Field Garage 

TBD Emergency Generators for Airport Computer Rooms, Vario 

TBD Install Pneumatic Tube System in Central Garage 

TBD Install Public Address System in IT Garages 

TBD Install Variable Message Signs (VMS) 

TBD License Plate Imaging System 

TBD Multi-User Flight Information Display 

TBD New Construction of Emergency Response Facility (ERF) 2 

TBD Purchase and Install 'Pay-on-Foot* Parking Payment Syste 

TBD Remodel Central Garage Offices 

TBD Replace Composite Roofs on Elevator Cores and Stairwells 

TBD Replace Garage Level 5 Doors and Install Weather Canopie 

TBD Replace/Modernize Static Signage in Central Garage 

TBD Telecommunications Construction/Repairs, FY 2001 

T3D Tenant Electrical Panelboards 

TBD Two Stations for AirTrain Extension 

TBD Upgrade Valet Customer Waiting Area in Central Garage 

Total 



First Bond Sale Am 

6,225,000 

681.000 

5,525,500 

3,000,000 

2,839.000 

735,000 

1,700.000 

5.000,000 

12.000,000 

1,000,000 

1,500,000 

10,000,000 

1,000,000 

4,000,000 

316,250 

2,000,000 

1.036,463 

120,000 

35,000,000 

2,500,000 

700.000 

110.000 

1.000,000 

6,000,000 

56,500,000 

^3,000,000 

2.000,000 

25,000,000 

249,000 

2490,000 

62.250 

1,245.000 

400,000 

249.000 

154,500 

2.241,000 

883.000 

575,000 

1,324,500 

224,100 

229,200 

199,200 

124.5C0 

510.450 

747,000 

7,000.000 

80,190 

$249,477,103 



An 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

Items 5 and 6 - Files 00-1265 and 00-1267 

Note: Tbese items were continued by the Finance and Labor Committee at its 
meeting of August 23, 2000. The Transportation and Land Use Committee, 
at its meeting of August 22, 2000, recommended that File 00-1265 be moved 
to the full Board of Supervisors for approval. 

Departments: Department of Administrative Services, Real Estate Division 

Department of City Planning 

Mayor's Office of Business and Economic Development 
Redevelopment Agency 

Item: Item 5. File 00-1265: Resolution affirming the certification of 

the Yerba Buena Redevelopment Project Area 
Expansion/Emporium Site Development Final Supplemental 
Environmental Impact Report by the Planning and 
Redevelopment Agency Commissions, and adopting 
environmental findings (and a statement of overriding 
considerations) pursuant to the California Environmental 
Quality Act and State Guidelines in connection with adoption 
of the Yerba Buena Redevelopment Project Area 
Expansion/Emporium Site Development Project, and various 
other actions necessary to implement the project. 

Item 6. File 00-1267: Resolution approving and authorizing 
a Tax Increment Allocation Pledge Agreement between the 
City and County of San Francisco and the Redevelopment 
Agency, under which the City agrees to a pledge by the 
Redevelopment Agency of a portion of the available non- 
housing tax increment generated by the redevelopment of the 
project site (specifically including Assessor's Block 3705, Lots 
9, 10, 12, 13, 14, 15, 17, 18, 33, 38, and 43) in favor of 
• Emporium Development, L.L.C., a subsidiary of Forest City 
Enterprises, Inc. in furtherance of the implementation of the 
Redevelopment Plan amendment for the addition of the 
Emporium Site Area to the Yerba Buena Center Project 
Area; approving and authorizing a financing agreement and 
covenant to operate in connection with the development of 
the Emporium Site Area; approving an allocation of tax 
increment for affordable housing purposes in excess of the 
minimum amount required under Redevelopment Law; 
making elections with respect to the allocation of tax 
increment; adopting findings pursuant to the California 
Environmental Quality Act; and adopting findings that the 

Board of Supervisors 
Budget Analyst 



41 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

agreement is consistent with the City's General Plan and 
Eight Priority Policies of City Planning Code Section 101.1. 

Description of 

the Project: Emporium Development, L.L.C. (the Developer) 1 has 

proposed redeveloping the site of the former Emporium 
Building and adjacent warehouses and office buildings (the 
Project Site Area) as a multi-story, multi-use complex with 
rerouted portions of Jessie Street on either side of it (the 
Project). The proposed 1,607,000 gross square foot complex 
would comprise: 

• A shopping galleria (up to approximately 505,000 square 
feet), anchored by a new Bloomingdale's Department 
Store (an additional 375,000 square feet), for up to a total 
of approximately 880,000 square feet. 

• Entertainment, restaurant, and cinema space (up to 
approximately 115,000 square feet). 

• Office space (up to approximately 237,000 square feet). 

• A hotel tower comprising up to 465 hotel rooms (up to 
approximately 375,000 square feet). 

Construction of the Project is scheduled to take 28 months, 
commencing in December of 2000 for completion by March of 
2003. In addition to the construction of the proposed 
1,607,000 square foot complex described above, construction 
would involve: 

• Restoring historically significant portions of the former 
Emporium Building, which is considered to be a 
significant building under Objective 12 of the Downtown 
Plan Element of the General Plan. The proposed Project 
would preserve the following elements of the Emporium 
Building: its Market Street facade, much of the front 65 
feet of the building (which would require seismic 
upgrading), the dome, and the rotunda. The remainder 
of the Emporium Building and other existing structures 
in the Project Site Area would be demolished. 

• Constructing underground links to the Powell Street 
MUNI and BART station. 



1 Emporium Development, L.L.C. is a California limited liability company which is ultimately 
controlled by Forest City Enterprises, Inc., a publicly traded Ohio corporation with assets in excess of 
$3,500,000,000. 

board of supervisors 
Budget Analyst 



42 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



With regard to the hotel component of the Project, according 
to Mr. Jesse Smith of the City Attorney's Office, the 
Developer would be required to build a pad for the hotel 
above the Mission Street retail/entertainment portion of the 
complex, and to use its best efforts to cause the hotel to be 
built. According to Mr. Smith and Mr. Kevin Warner of the 
Redevelopment Agency, the Developer has the following four 
main options in order to satisfy a condition to closing the 
combined Owner Participation and Disposition and 
Development Agreement (OPA/DDA): 

(1) It could lease or sell the airspace to a separate hotel 
developer to construct the hotel (the most likely option) 2 . 
In this case, the Redevelopment Agency has the right to 
review the binding agreements between the Developer 
and the separate hotel developer for consistency with 
the OPA/DDA as a condition to closing. 

(2) The Developer's parent company, Forest City 
Enterprises, Inc., could establish its own hotel developer 
subsidiary company to construct the hotel. 

(3) The Developer could construct the hotel itself. 

(4) The least likely option is that no hotel could be 
constructed. The last three options would require the 
Redevelopment Agency's approval before the closing 
could occur. According to Mr. Smith, under the 
proposed CEQA findings and assorted expert economic 
analyses, a reduced development proposal which does 
not include a hotel is deemed financially infeasible. 
Furthermore, according to Mr. Smith, the Developer has 
a significant financial incentive to ensure that the hotel 
is built because, among other things, if it was not built, 
the net available Property Tax increment contribution 
from the Redevelopment Agency would be substantially 
reduced. 



2 According to Mr. Warner, it is estimated that the air space lease cost to a separate hotel developer 
would be either $1,125,000 per year during the Project's construction and $1,600,000 per year after 
the Project's opening, or a one-time sale price of at least $13,333,333 prior to the end of the 
development costs determination period (which would provide a minimum 12 percent to the 
Developer of approximately $1,600,000 per year). The development costs determination period is the 
period ending upon the earlier of (a) the first day of the first month after 95 percent of the mixed-use 
portion of the complex's space is leased and occupied, or (b) the end of the third year after the 
Project's opening. 

Board of Supervisors 
Budget Analyst 



A3 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

The hotel could include up to 60 "interval ownership units" 
which are luxury suites with kitchen facilities. Fractional 
interests in these units would be sold in advance with 
occupancy rights for transient use over specific periods of 
time. According to Mr. Smith, the decision to develop such 
units would be a private matter between the Developer and 
the hotel developer, subject to the requirements of the Yerba 
Buena Center Redevelopment Plan and related plan 
documents (including the OPA/DDA). However, it is highly 
likely that such presold units would be built because they 
would provide the hotel developer with stable income. 
Furthermore, such units could be sold as residential 
condominium units if the criteria for parking, open space, 
and affordable housing specified in the proposed Yerba 
Buena Center Redevelopment Plan are met 3 . Approximately 
16,100 square feet of the Project would be publicly accessible 
open space both inside the complex and on its roof. If the 
Project incorporates residential condominium units, 
additional open space would be provided for the residents. 

Although the total parking requirement for the proposed 
Project has been estimated to be 1,330 spaces, no space has 
been set aside for parking. The proposal assumes that: 

• Based on economic analyses commissioned by the 
Developer (reviewed and determined to be reasonable and 
accurate by a real estate economic consulting firm, Keyser 
Marston Associates, on behalf of the City and the 
Redevelopment Agency), construction of underground 
parking would be economically infeasible. 

• The Project Site Area is located next to a public transit 
hub, and the City has a transit first policy. 

• The adjacent parking building at Fifth and Mission 
Streets has some spare capacity 4 and DPT is examining 



3 If such a conversion takes place, the Developer (or the hotel developer) is liable for all development 
fees and exactions which would apply if such residential condominium units had been built outside of 
the redevelopment area. According to Mr. Smith and Mr. Warner, if the Redevelopment Agency's 
standard 20 percent requirement for affordable housing would require a greater in lieu payment, or 
the development of more affordable housing, than would be required by the Planning Code's 
affordable housing requirements, then the Redevelopment Agency's requirement would govern. 

4 According to Mr. Ron Szeto of DPT, peak occupancy for the parking garage at Fifth and Mission 
Streets occurs around 1 pm. In July of 2000, 1 pm occupancy was an average of 75-85 percent on 
Sundays through Fridays, and an average of 95-98 percent on Saturdays. In January of 2000, 1 pm 
occupancy was an average of 65-85 percent. During major conventions at the Moscone Convention 
Center (approximately 20 to 25 days per year), the garage can provide up to 105 percent occupancy, 

board of supervisors 
Budget Analyst 



44 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

possible expansion of tbat garage and other ways to add 
parking capacity nearby. 

• Under the proposed mitigation monitoring program and 
the OPA/DDA, the Developer would be responsible for 
developing and implementing transportation initiatives 
for customers and employees. 

• According to the Transportation Authority, the real traffic 
congestion problem in the South of Market Area is 
freeway access, not availability of parking. 

The Budget Analyst notes that other current and projected 
downtown developments (including the Ferry Building 
renovation, the Pier 1 development, MUNI's hotel project at 
Mission and Steuart Streets, and the Moscone Convention 
Center expansion) also do not propose to construct new 
parking spaces in the downtown area. If the interval 
ownership units in the hotel are converted to residential 
condominium units, the Developer would be required to 
either: 

(a) Provide one parking space for every four residential 
condominium units if such parking spaces are located 
within 600 feet of the Project, or one parking space for 
every two residential condominium units if such parking 
spaces are located elsewhere in the South of Market 
Area; or, 

(b) Pay an in-lieu fee to the City in an amount equal to 
what it would cost the City to build the required number 
of parking spaces on City property, up to a cap of $8,333 
per unit for a maximum of 60 units ($500,000), based on 
the number of units the Developer or hotel developer 
elects to convert. 

Description of 
the Emporium 

Site Area: The approximately 6.77 acre Emporium Site Area comprises 

a number of land parcels: 

• The former Emporium Building at 835 Market Street and 
adjacent warehouses and office buildings presently owned 

due to the provision of a valet parking service. During these periods, DPT also coordinates with 
other garages in the area to maximize parking capacity. This information is consistent with the 
survey performed by transportation consultant Wilbur Smith for the Developer, according to Mr. 
Smith. 

Board of Supervisors 
Budget Analyst 



45 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

by Bloomingdale's, Inc. (Assessor's Block 3705, Lots 13, 
14, 15, 17, 18, 33, 38 and 43). 

• Buildings owned or held under option by the Developer 
(Assessor's Block 3705, Lots 9, 10 and 12). 

• A 15,420 square foot portion of the 33,023 square foot 
section of Jessie Street which runs east-west between 
Fourth Street and Fifth Street to be vacated and sold by 
the City, through the Redevelopment Agency, to the 
Developer for $3,100,000. 

• An approximately 100,000 square foot portion of Mission 
Street extending to the Mission Street wall of the parking 
garage at Fifth and Mission Streets. 

Of the Emporium Site Area's 6.77 acres, 4.48 acres form the 
Project Site Area on which the complex and the rerouted 
portions of Jessie Street would actually be built (Assessor's 
Block 3705, Lots 9, 10, 12, 13, 14, 15, 17, 18, 33, 38 and 43, 
and the subject portion of Jessie Street). 

Attachment I is a map of the various parcels of land which 
comprise the Emporium Site Area. Attachment II is a plan 
of the Project complex and the proposed configuration of 
Jessie Streets West and East immediately adjacent to the 
complex. Attachment III is a map showing the geographic 
relationship between the Emporium Site Area and the Yerba 
Buena Center Redevelopment Project Area. 

In FY 2000-01, all of the above parcels of land (including the 
current buildings) combined are assessed for Property Tax 
purposes at $69,957,924. 

An economic analysis performed by a private real estate 
economics consulting firm, the Sedway Group (for the 
Developer), and reviewed and determined to be reasonable 
and accurate by Keyser Marston Associates, Inc. (on behalf of 
the City and the Redevelopment Agency), found that the 
portion of the Emporium Site Area on which the Emporium 
Building and the Emporium Annex are located (Assessor's 
Block 3705, Lots 38 and 43) would have substantial value, 
perhaps $26,000,000 or more, in their own right if the land 
were unencumbered by the requirement to restore the 
historic Emporium Building. However, the Sedway Group 
determined that Lots 38 and 43 have a negative value, even 
if all of the transferable development rights originally 

Board of Supervisors 
Budget Analyst 



46 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



associated with the site and potential historic tax credits are 
taken into account, because the cost of preserving and 
restoring the historic building exceeds the value of the 
renovated building. The Sedway Group concluded that there 
is no economic incentive for a property owner or developer to 
pursue another project on this site which involves 
rehabilitation of the Emporium Building. Therefore, 
although (a) the Emporium Site Area as a whole is assessed 
for Property Tax purposes at $69,957,924, and (b) two key 
parcels of land, Lots 38 and 43, would be worth $26,000,000 
or more in their own right if unencumbered by the 
requirement to preserve the Emporium Building, the 
preservation of the Emporium Building imposes a significant 
cost constraint on the Developer. 

On completion, the 4.48 acre (or 195,000 square foot) Project 
Site Area would be allocated to the following uses: 

• 182,190 square feet for the complex's "footprint." 

• 12,810 square feet for mid-block rerouting of Jessie Stret 
to Mission Street along both sides of the complex. 

According to DPW, the subject mid-block portion of Jessie 
Street is no longer needed for present or prospective public 
use, with the condition that a public utility easement be 
reserved for Pacific Gas and Electric gas and electric 
facilities and Pacific Bell telecommunications facilities, and 
that Jessie Street be rerouted to either side of the complex. 
To achieve the required street rerouting, the Developer, 
together with Bloomingdale's, Inc. where required (see 
"Ownership" below), would dedicate, construct, and convey to 
the City 12,810 square feet of land to permit the mid-block 
rerouting of Jessie Street to Mission Street along both sides 
of the Project. (This would involve the demolition of the 
existing buildings on this land.) Of this 12,810 square feet of 
land, the Developer would dedicate, construct, and convey to 
the City approximately 6,405 square feet, or one half, for a 
newly created street, "Jessie Street West", and an additional 
approximately 6,405 square feet, the other half, for a newly 
created street, "Jessie Street East." According to the 
Redevelopment Agency, the new Jessie Streets West and 
East would facilitate efficient and safe traffic circulation for 
vehicles and pedestrians to serve the Project, including a 15- 

Board of Supervisors 
Budget Analyst 



hi 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

bay truck loading and delivery area served from Jessie Street 
West. 

Ownership: Bloomingdale's, Inc., an Ohio corporation, owns most of the 

Project Site Area 5 . Bloomingdale's, Inc. has deemed the 
existing Emporium Building as unsuitable for a new 
Bloomingdale's department store because it does not meet 
modern retail standards. However, Bloomingdale's, Inc. 
considers the costs of building only a new department store 
building to be prohibitive given the requirement to preserve 
the historic features of the Emporium Building. Therefore, 
Bloomingdale's, Inc. wishes to be part of a larger 
development to enhance the patronage to its Bloomingdale's 
department store, while lowering its cost of occupying the 
space. Consequently, Bloomingdale's, Inc. has partnered 
with the Developer to create a mixed use complex. Upon the 
Developer's completion of (a) the shell and core of the 
department store, (b) the hotel pad, and (c) the mixed-use 
portion of the Project, Bloomingdale's, Inc. wiU convey all of 
the project site property to the Developer in exchange for a 
$30,000,000 shell build-out for, and fee ownership of, its 
Bloomingdale's department store. Effectively, the Developer 
would pay Bloomingdale's, Inc. $30,000,000 for (a) the land, 
and (b) its commitment to operate a Bloomingdale's 
department store as a major attraction for the retail portions 
of the mixed-use complex 6 . 

The Developer would be responsible for the costs associated 
with the termination of existing leases for property within 
the project site and any relocation assistance costs associated 
with existing business tenants. Certain existing office and 
retail uses would be provided with relocation benefits to the 
extent they are eligible under the Verba Buena Center 



5 Bloomingdale's, Inc. owns most of the Project Site Area except (a) Assessor's Block 3705, Lot 9, 
which is owned by the Developer, (b) Assessor's Block 3705, Lots 10 and 12, which are under option 
to the Developer, and (c) the subject portion of Jessie Street. 

6 The structure of the proposed transaction is laid out in Recitals H and I of the draft OPA/DDA. 
The Developer anticipates, firstly, acquiring fee title to Lots 10 and 12 and to the subject portion of 
Jessie Street, and then conveying fee title to all of its holdings to Bloomingdale's, Inc. 
Bloomingdale's, Inc. would then ground lease the entire project site to the Developer during the 
Project's construction. Upon completion, Bloomingdale's, Inc. would convey fee title to the project 
site (excluding the department store parcel) to the Developer, thereby terminating the ground lease. 
Under a separate agreement, Bloomingdale's, Inc. and the Developer would enter into a Reciprocal 
Easement Agreement which is anticipated to include an operating convenant for Bloomingdale's, Inc. 
to complete the build-out of, open, and operate a Bloomindale's department store. 

Board of Supervisors 
Budget Analyst 



48 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

Redevelopment Plan or State redevelopment law. Tbey could 
be relocated either within or outside the Project. There are 
no existing residential uses. 

Funding 

Arrangements: According to Mr. William Carney of the Redevelopment 

Agency, the Project is expected to increase the value of the 
Emporium Site Area by $516,210,742 7 , from its current 
assessed valuation (for Property Tax purposes) of 
$69,957,924 to $586,168,666. This projected increase in 
assessed valuation would result from improvements funded 
by a combination of: 

• Private investment (see "Ownership" above); and 

• Redevelopment Agency contributions of Property Tax 
increment funding up to a maximum amount of 
$27,000,000 (see Comments No. 4 through 10 below). The 
maximum amount of $27,000,000 represents the net 
present value 8 as of the Project's opening. 

Based on the projected increased valuation of $516,210,742 
once the Project has been completed and the FY 2000-01 
Property Tax rate of $1,136 per $100 of assessed valuation, 
increased Property Tax revenue from the completed Project 
would total $5,864,154 annually. The size of the annual 
Property Tax increment contributions made by the 
Redevelopment Agency (funded by the incremental Property 
Tax revenues being generated as the Project is constructed) 
would be reduced if there was better than expected 
performance against net sales proceeds or net refinancing 
proceeds benchmarks (i.e. when net sales or refinancing 
proceeds exceed development costs less $25,000,000 9 ). 



7 This amount of $516,210,742 comprises: 

• A projected $447,984,612 on the secured roll (i.e. taxable real property) consisting in rounded 
figures of (a) $46,000,000 for the Bloomingdale's department store shell, core, and fit-out, (b) 
$57,000,000 for the hotel, (c) $113,000,000 for 60 interval ownership units, and (d) $232,000,000 
for other retail, entertainment, and office spaces. 

• A projected $68,226,130 on the unsecured roll consisting of tenant improvements for 
Bloomingdale's department store, and for the Project's retail, entertainment, and office space, 
based on an assumed square foot value for tenant improvements prepared by the Sedway Group 
and applied to the amount of new development. 

8 The subject proposal uses a net present value of future dollars based on a 7.5 percent annual 
discount rate. 

9 According to Mr. Smith and Mr. Warner, the amount of $25,000,000 means that at the time the 
Property Tax increment contributions could stop and the City's participation in Project revenues 

Board of Supervisors 
Budget Analyst 



49 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

In return for the Redevelopment Agency's Property Tax 
increment contributions, the City would participate in future 
net cash flow, net refinancing proceeds, and net sales 
proceeds from the Project (see Comments No. 11 through 14 
below). 

A 12 percent rate of return has been negotiated as a return 
on cost for the Developer and as a return on the 
Redevelopment Agency's investment of Property Tax 
increment assistance for the City. According to Mr. Warner, 
a 12 percent rate of return on cost for investors is reasonable 
in the current real estate development market. The 
Redevelopment Agency, the Mayor's Office of Economic 
Development, and independent real estate economics 
consultants reviewed mixed-use projects in large 
metropolitan areas and determined a range of returns on 
developers' costs from 10.5 percent to 13 percent, depending 
on the projects' varying components and market risk factors. 
Based on this analysis, a 12 percent annual return based on 
the one-time total cost of the Project was assessed as a 
reasonable rate of return given the risks to the Developer of 
the subject Project. 

According to Mr. Warner, the 12 percent rate of return would 
be a simple, rather than compound, rate of return on the net 
operating income 10 . If the Developer achieved a higher than 
12 percent rate of return on costs, there could be two 
benefits: (a) the Developer could require less Property Tax 
increment contributions from the Redevelopment Agency 
because the increment cutoff, based on the Developer's 
recovery of actual development costs less $25,000,000 from 
sales and refinancings, could be triggered (see Comment No. 
8), and (b) the City's participation in the Project revenues 
could begin early because the Developer could achieve the 

could begin, the Developer would not be entitled to recover all of its costs and would be required to 
retain significant equity in the Project for as long as the City has money in the Project (in the form of 
Property Tax increment which has not yet been repaid). 

10 Net operating income is defined as all gross revenues received by the Developer from the Project, 
less (a) operating expenses for each Developer fiscal year, and (b) the amount of the Capital 
Expenditures Reserve for each Developer fiscal year. It excludes any development cost item and 
there is no deduction for debt service. According to Mr. Smith and Mr. Warner, debt service is not 
deducted from gross revenues for the purpose of determining the net operating income and, 
therefore, the risk for debt service is solely carried by the Developer, to the City's benefit in the 
payment of participation. 

Board of Supervisors 
Budget Analyst 



50 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

net increase of net sales proceeds benchmarks before the 18 th 
anniversary date of the Project opening (see Comment No. 
12). Mr. Warner states that the City's participation would 
similarly be based on a 12 percent (simple interest) rate of 
return on the Redevelopment Agency's investment in the 
Project. 

Project Approvals: The required Project approvals fall into the following four 
categories: 

(1) Entitlements: these include (a) adopting related CEQA 
findings, mitigation measures, statement of overriding 
considerations, and mitigation monitoring program (File 
00-1265 which will also be considered at the 
Transportation and Land Use Committee's August 22, 
2000 meeting), (b) amending the Yerba Buena Center 
Redevelopment Plan (File 00-1257 which has been 
referred directly to the Board of Supervisors for a public 
hearing on September 18, 2000), (c) amending the City's 
General Plan and Zoning Map so that they are 
congruent with the Yerba Buena Center Redevelopment 
Plan Amendment (Files 00-1256 and 00-1258 to be 
considered at the Transportation and Land Use 
Committee's August 22, 2000 meeting), and (d) 
approving Jessie Street and Mission Street sidewalk 
widths, and parking and traffic regulations (Files 00- 
1259, 00-1311, and 00-1434 to be considered at the 
Transportation and Land Use Committee's August 22, 
2000 meeting). 

(2) Agreements for Development of the Project: these 
include approving (a) the OPA/DDA between the 
Redevelopment Agency and the Developer, and (b) an 
Owner Participation Agreement between the 
Redevelopment Agency and Bloomingdale's, Inc. 
According to Mr. Smith, neither the OPA/DDA, nor the 
Owner Participation Agreement between the 
Redevelopment Agency and Bloomingdale's, Inc. (which 
has yet to be finalized) require Board of Supervisors 
approval. However, Redevelopment Agency approval of 
these agreements is conditional upon the Board of 
Supervisors adopting the Yerba Buena Center 
Redevelopment Plan Amendment. 

(3) Financing: this includes the subject resolution 
approving the use of Property Tax increment under a 

Board of Supervisors 
Budget Analyst 



■51 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

Tax Allocation Agreement between the City and the 
Redevelopment Agency and a Financing Agreement 
between the City, the Redevelopment Agency, and the 
Developer. 
(4) Site Assembly: this includes approving (a) the vacation 
of a portion of Jessie Street (having adopted the 
Resolution of Intent under File 99-2235, the Board of 
Supervisors has scheduled a public hearing for 
September 18, 2000), and (b) a Sale and Exchange 
Agreement for the conveyance by the City of the vacated 
street area and the conveyance by the Developer of 
areas for the rerouting of Jessie Street (File 00-1266 to 
be considered at the Transportation and Land Use 
Committee's August 22, 2000 meeting). 

Comments: Yerba Buena Center Redevelopment Plan 

1. According to Mr. Carney, the Redevelopment Agency is 
seeking to make the Project an approximately 6.77 acre 
extension to the existing 87 acre Yerba Buena Center 
Redevelopment Project Area. The purpose of the Yerba 
Buena Center Redevelopment Plan is to revitalize a 
substantial portion of the South of Market Area by creating a 
mixed-use civic center with cultural institutions, hotels, 
retail locations, affordable housing, and the Moscone 
Convention Center. The Project is deemed to be an 
appropriate extension of the Yerba Buena Center 
Redevelopment Area because it provides a major retail, 
entertainment, and hotel center in close proximity to the 
Yerba Buena Gardens and Moscone Convention Center, and 
enhances the pedestrian and public transit connections 
between those locations and Market Street. 

2. Adding the Project to the Yerba Buena Center 
Redevelopment Project Area would provide the 
Redevelopment Agency with the necessary legal and 
financial ability to contribute Property Tax increment 
funding to the Project in order to alleviate the economic and 
physical blight of the Emporium Site Area, according to Mr. 
Carney. Furthermore, the proposed Yerba Buena Center 
Redevelopment Plan Amendment would modify some of the 
building height and size constraints of the City's Planning 
Code. Attachment IV is a memorandum provided by Mr. 
Carney which specifies the Planning Code modifications in 

Board of Supervisors 
Budget Analyst 



52 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



the proposed Amendment. The proposal to amend the Yerba 
Buena Center Redevelopment Plan is subject to pending 
legislation which, in accordance with the requirements of 
State redevelopment law, has been sent directly to the Board 
of Supervisors for consideration after a public hearing (File 
00-1257 to be heard by the full Board of Supervisors on 
September 18, 2000). 

3. According to File 00-1256 (an ordinance amending the 
San Francisco General Plan to be considered at the 
Transportation and Land Use Committee's August 22, 2000 
meeting), any property to be included in the Emporium Site 
Area would be necessary for the effective redevelopment of 
that area, and would not be included purely for the purpose 
of enlarging the area eligible for obtaining Property Tax 
increment contributions from the Redevelopment Agency, 
and thereby increasing such contributions. 

Property Tax Increment Contribution 

4. According to Keyser Marston Associates, Inc. and the 
Sedway Group, despite the currently strong San Francisco 
real estate market, none of the six development plans 
proposed for the Emporium Site Area would be economically 
feasible without a public subsidy because of what they term 
the "extraordinary costs" associated with retaining and 
restoring several historic portions of the Emporium Building, 
site assembly, relocation of utilities, and construction of new 
streets. (Attachment V, provided by Mr. Carney, 
summarizes the six alternative scenarios.) For a developer to 
achieve an annual 12 percent rate of return on the cost of 
developing the Emporium Site Area, both real estate 
economics consultants have identified a "feasibility gap" of 
$32,800,000, a funding shortfall which they believe would 
require public funding. The amount of $32,800,000 
represents (a) approximately 6.4 percent of the total Project's 
incremental value of $516,210,742, or (b) approximately 10.9 
percent of the Developer's capped development costs of 
$300,000,000 u . However, according to Mr. Smith and Mr. 



11 Capped development costs are defined as the lesser of (a) actual development costs, or (b) 
$300,000,000 less a maximum of $15,000,000 for the gross sales proceeds from the hotel parcel 
(minus reasonable closing costs, brokerage fees, and prepayment penalties) if the hotel parcel is sold 
before the end of the development costs determination period (which is upon the earlier of either 95 
percent occupancy or the end of the third year after opening). The $300,000,000 maximum capped 

Board of Supervisors 
Budget Analyst 



si 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

Warner, $32,500,000 represents a much more significant gap 
in relation to the Developer's projected cash equity in the 
Project of approximately $55,000,000. 

5. In response to the identified "feasibility gap" of 
$32,800,000, the Redevelopment Agency proposes to 
contribute Property Tax increment funds up to the amount of 
$27,000,000 (in net present value as of the date the Project 
opens) to reimburse the Developer for expenditures to 
alleviate blight and provide public benefits such as: 

(1) The historic preservation costs associated with the 
Project. These are estimated to cost $21,333, 000 12 . 
Attachment VI provided by Mr. Carney, summarizes the 
estimated historic preservation costs. 

(2) Site assembly and preparation (which includes 
$3,100,000 to purchase the subject portion of Jessie 
Street). 

(3) Transit and circulation improvements. 

(4) Economic revitalization and job creation. 

According to Mr. Smith and Mr. Warner, although these 
types of eligible expenditures for which Property Tax 
increment must be allocated are specified in an attachment 
to the Financing Agreement, the exact cost items on which 
the $27,000,000 Property Tax increment funding would be 
expended have not yet been determined. They note, 
however, that the Developer would be required to report on 
what eligible costs it expends for the Property Tax increment 
contributions it receives. 

6. The $27,000,000 Property Tax increment contribution 
(net present value at the Project's opening) is a figure which 

development cost does not include the Bloomingdale's department store build-out and the 
construction of the hotel above the pad, and it could be decreased if the overall scope of the Project is 
reduced. According to Mr. Smith, capping development costs protects the City against cost overruns 
delaying the commencement of the City's participation term. It also limits the total amount of 
interest on the Developer's equity during construction which counts towards development costs. 
Lowering development costs could benefit the City in two possible ways: (1) it could accelerate 
reaching the financial benchmark for the early cessation of Property Tax increment, and (2) it could 
accelerate reaching the financial benchmark for the early commencement of participation in Project 
revenues. 

12 According to the Sedway Group, the cost and construction risk of retaining these historic elements 
and selectively demolishing the rest of the structure is much greater than demolishing the entire 
building and building on a clear site. 

Board of Supervisors 
Budget Analyst 



54 






Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

results from negotiations between the City and the Developer 
over the value of the entire feasibility gap. The $5,800,000 
gap (approximately 1.9 percent of the Developer's capped 
development costs of $300,000,000) between the 
Redevelopment Agency's maximum Property Tax increment 
contribution of $27,000,000 (9 percent of capped development 
costs) and the estimated $32,800,000 "feasibility gap" 
(approximately 10.9 percent of capped development costs) 
would be closed by the Developer through one or more of the 
following mechanisms: reducing project costs through value 
engineering, increasing rental revenues, finding other 
funding sources, or by accepting a lower rate of return. 
While the $27,000,000 Property Tax increment contribution 
is only 9 percent of the capped development costs of 
$300,000,000, it represents a more significant contribution to 
Project development costs given that the Developer is 
expected to contribute equity in the amount of $55,000,000 
up-front. 

7. The Redevelopment Agency justifies the proposed 
Property Tax increment contribution of $27,000,000 in net 
present value as of the date the Project opens, or 
approximately 5.2 percent of the Project's projected increased 
value of $516,210,742, on the grounds that the Project would 
generate the following public benefits: 

• The Project would revitalize the area of mid-Market and 
Mission Streets. 

• The Project would retain, restore, or adaptively reuse 
significant historic features of the Emporium Building. 

• The Project would create an estimated 2,300 direct 
permanent, full time equivalent jobs 13 and an estimated 
1,100 construction jobs during the construction period 14 . 
The Developer would commit to targets for (a) the 
employment of economically disadvantaged individuals, 
South of Market Area residents, and San Francisco 
residents, and (b) tenant leases with minority and 
women-owned businesses. 



13 Calculated by Keyser Marston Associates, for the City and the Redevelopment Agency. 

14 Also calculated by Keyser Marston Associates, which estimates that, in addition to direct jobs, the 
Project would generate in San Francisco an approximate 4,400 indirect permanent jobs, and 1,200 
indirect construction jobs, as a result of the Project's economic "spin-off." 

board of supervisors 
Budget Analyst 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



The Developer would pay $800,000 into the City's First 
Source Hiring Program 15 . The Developer and other 
employers involved in the Project would be required to 
adhere to the City's First Source Hiring Ordinance and 
hire qualified economically disadvantaged individuals 
into entry level jobs. 

The Developer would pay $250,000 for special 
improvements to, or the operation of, Hallidie Plaza 16 . 
The Developer would pay $1,500,000 for parking 
improvements in the South of Market Area or other 
parking solutions determined by the City (this 
expenditure would be separate from the parking 
expenditures described above which relate to the 
construction of residential condominium units). 
The Developer would implement a number of measures to 
encourage the use of public transportation by employees 
and customers. 

The Developer would spend at least $1,000,000 on Powell 
Street MUNI and BART station improvements, and at 
least $250,000 on off-site mitigation measures identified 
in the Environmental Impact Report for the Project. 
The Project would generate a projected $14,000,000 per 
year in new tax revenues for the City from the third year 
after the complex's opening (beginning in Year 2006) 17 . 
The Project would contribute at least $16,000,000 in 
today's dollars to affordable housing over 30 years, which 
doubles the affordable housing fee which would otherwise 
be payable under the Planning Code. This would be paid 
on the basis of 20 percent of the Property Tax increment 
for the first 16 years from the effective date of the Board 
of Supervisors ordinance approving the Yerba Buena 
Center Redevelopment Plan Amendment (File 00-1257) 



15 The City's First Source Hiring Program is a job training and job referral program for economically 
disadvantaged San Francisco residents seeking entry-level jobs. In terms of the subject Project, it is 
anticipated that the Redevelopment Agency would administer the program for construction jobs, 
while the City would administer the program for permanent jobs. The Developer would designate 
and fund a liaison person to work with the Redevelopment Agency and the City to implement the 
First Source Hiring Program within the Project, in part by informing tenants of their obligation to 
advise the City about available entry-level jobs. 

16 This amount is approximately the same as would be payable if the Project site street frontages 
were part of the Union Square Business Improvement District. 

17 Keyser Marston Associates estimates S6, 000, 000 per year to the General Fund and $8, 000. 000 per 
year to other City funds (dedicated MUNI and DPW revenues, hotel tax funds, and child care fees). 
These estimates consist of total projected tax revenues (including all Property Tax increment) less 
the City's projected costs of providing additional services. 

board of supervisors 
Budget Analyst 



56 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



and 40 percent for years 17 to 30. The Project would also 
contribute a cbild care fee of $1 per square foot of new 
hotel and office space, for an estimated total contribution 
of $398,000. According to the Planning Department, 
additional fees would also be payable for open space (an 
estimated $46,000) and for transit impact (an estimated 
$115,000). 
• An annual $200,000 payment would be made to the City 
(indexed for inflation through annual adjustments based 
on changes in the Consumer Price Index) for the first 15 
years of the Project, or a one-time in-lieu payment of 
$2,250,000, if the Developer allocates hotel rooms as 
interval ownership units. These payments are a 
negotiated amount which would be in lieu of possible lost 
Hotel Tax revenues should such hotel units be converted 
to interval ownership units. 

8. The Redevelopment Agency's Property Tax increment 
contribution would not exceed a cap of $27,000,000 in net 
present value as of the date of the Project's opening and 
would not continue beyond the earlier of (a) 13 years after 
the Project opens, (b) 16 years after the effective date of the 
ordinance adopting the Yerba Buena Center Redevelopment 
Plan Amendment (File 00-1257) 18 , or (c) the year in which 
the Developer receives net proceeds from refinancing or sale 
in an amount equal to, or greater than, actual development 
costs less $25,000,000. 

In any year, the Redevelopment Agency's annual maximum 
Property Tax increment contribution to the Developer would 
not exceed 60 percent of the total Property Tax increment 
revenues generated within the Emporium Site Area that 
year. The Redevelopment Agency would pay the Property 
Tax increment contributions to the Developer on a "pay-as- 
you-go" basis, once annually, from the first year in which 
construction of the Project produces incremental assessed 
value 19 . No Property Tax increment revenues would be 



18 According to Mr. Smith, the 16 year period caps the risk to the Redevelopment Agency of a longer 
than anticipated construction period. This is subject to a possible maximum three year extension if 
there is major damage to the Project (outside the Developer's control) which reduces the annual net 
available Property Tax increment to the Redevelopment Agency by 10 percent or more. 

19 The Agency, subject to Board of Supervisors approval, would have the option to issue Tax 
Allocation Bonds and pay the Developer the Increment Liquidation Amount in lieu of pay-as-you-go 
increments, if that would be financially advantageous for the Redevelopment Agency. The 

Board of Supervisors 
Budget Analyst 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



available beyond the Property Tax increment generated by 
the Project itself. The Redevelopment Agency's annual 
Property Tax increment contribution could equal the total 
increment collected on the assessed value of taxable Project 
property, less: 

• The affordable housing set-aside. 

• An approximately 20 percent statutory pass-through 
required under redevelopment law for payments to 
funding agencies (including the City, the San Francisco 
Unified School District, and BART). 

• Up to 2 percent annual growth in the Property Tax base 
to adjust for inflation. 

• An annual fee to the Redevelopment Agency of $65,000 
for the first three years in which the Developer receives 
Property Tax increment, then $50,000 annually for the 
next four years, and then $35,000 annually until the end 
of the Property Tax increment contribution period (all 
amounts indexed for up to 3 percent annual inflation). 
These payments are intended to compensate the 
Redevelopment Agency for the costs of overseeing the 
Project. 

9. According to the estimates prepared by the Sedway Group 
for six alternative development scenarios for the Emporium 
Site Area (as described in Attachment V), this preferred 
development plan requires the least public subsidy and 
provides the most public benefits. However, the other five 
alternative scenarios would preserve more of the historic 
Emporium Building and would conform more closely with 



Increment Liquidation Amount would be (a) the amount of any prepayment penalty, plus 97 percent 
of the difference between (a) $27,000,000 plus 7.5 percent annual interest, and (b) the Property Tax 
increment and interest contributed thus far. However, according to Mr. Smith, pay-as-you-go 
Property Tax increment contributions are preferable to tax allocation bonds. Tax allocation bonds 
are based on proiected tax increment payments and are, therefore, at risk of reassessment or 
decreased tax revenues due to damage to the Project, and place more risk directly on the Developer 
(although pay-as-you-go makes it more difficult for the Developer to finance those proceeds). 
Conversely, the size of pay-as-you-go Property Tax increment contributions is determined by the 
Property Tax increment actually generated. Furthermore, tax allocation bonds would be more 
expensive because (a) the Yerba Buena Center Redevelopment Area has a shorter term which ceases 
between 2008 and 2010, thereby reducing the length of time available to amortize the bonds in the 
absence of a term extension or credit enhancement, (b) the Redevelopment Agency would have to pay- 
transaction costs associated with issuing the bonds, and (c) the City and the Redevelopment Agency- 
would need to safeguard against potential default on the bonds (such as obtaining a guarantee for 
shortfalls in tax increment funds to pay debt service costs). 

board of supervisors 
budget Analyst 



sa 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

existing Planning Code requirements. Mr. Tony Irons, the 
City Architect, has reviewed the construction cost estimates 
of the six Project alternatives and has deemed them 
reasonable, although he has not independently verified each 
component of the cost estimates. 

10. The Budget Analyst has received extensive economic 
analysis related to the Developer's need for the 
Redevelopment Agency's proposed Property Tax increment 
contribution of up to $27,000,000 to ensure the viability of 
the proposed project. However, none of the six development 
scenarios for which economic analyses were prepared (as 
listed in Appendix V) contain information on Bloomingdale's, 
Inc.'s future plans for this valuable, centrally located site if 
the proposed Project did not proceed with the assistance of 
the Redevelopment Agency's Property Tax increment 
contribution. 

While Federated Department Stores, Inc. has asserted that 
"the cost to bring to modern department store standards the 
historic, unreinforced masonry building, with its closely 
spaced columns and other challenges, is simply prohibitive" 
(refer to the letter contained in Attachment VII), the Budget 
Analyst cannot independently verify what Bloomingdale's, 
Inc. would do if the Project did not proceed. Therefore, the 
Budget Analyst is unable to determine the extent to which 
the asserted need for the Redevelopment Agency's proposed 
contributions of $27,000,000 in Property Tax increment to 
the Developer is necessary for the development of the 
property. 

City Participation in Project Revenues 

11. Under the proposed Project, in return for the City's 
Property Tax increment contribution, the City would 
participate in net cash flow, net refinancing proceeds, and 
net sales proceeds from the Project. The participation 
revenues, which would all go to the City's General Fund 20 , 
would be generated on the following basis: 



20 Under the Tax Allocation Agreement, the Redevelopment Agency irrevocably assigns participation 
payments to the City. 

Board of Supervisors 
Budget Analyst 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



• City participation in net cash flow is 35 percent of net 
operating income after the Developer recovers (a) for any 
participation payable in years 1 to 19 after the Project's 
opening, its 12 percent annual return on capped 
development costs plus accumulated net operating income 
shortfalls (and 12 percent interest on such shortfalls), and 
(b) for any participation payable in years 19 onwards, its 
annual 12 percent simple interest return on capped 
development costs. 

• City participation in refinancings would be 35 percent of 
the Developer's net proceeds from a refinancing. 

• City participation in sales would be 35 percent of the net 
proceeds from a sale. 

Selling the hotel parcel would represent one-time 
participation for the City if it happens after the end of the 
development costs determination period. If it occurs before 
the end of that period, it would reduce the development costs 
but there would be no participation in the sale of the hotel 
parcel. According to Mr. Warner, if the hotel pad is sold for 
up to $15,000,000, both the Developer's actual development 
costs 21 and the capped development costs would be reduced 
accordingly to the benefit of both the Developer (in terms of 
overall Project financing) and the City (due to the potential 
increased likelihood that the Developer would reach the 
financial benchmark for the early cut-off of Property Tax 
increment). If the hotel parcel sale's proceeds exceed 
$15,000,000, those proceeds above $15,000,000 reduce only 
the Developer's actual development costs, not the capped 
development costs because of a negotiated $15,000,000 cap 
for hotel parcel sales proceeds. However, the City again 
benefits in that reduced actual development costs accelerate 
the City's participation in Project revenues. 

12. The City's participation would begin on the earliest of: 

• The year in which both (a) the Project's net operating 
income, exclusive of the City's Property Tax increment 



21 Actual development costs are defined as (a) the Developer's expenditures on development of the 
Project, and (b) 12 percent interest on the Developer's equity during the construction period. 
Development costs would be reduced by (a) the amount of Property Tax increment rebated to the 
Developer during construction, (b) any Project revenues received by the Developer during 
construction, and (c) the total net proceeds from a sale of the hotel parcel if it is sold before the end of 
the development costs determination penod. 

Board of Supervisors 
Budget Analyst 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



contribution, is equal to or greater tban an annual 12 
percent return on capped development costs, and (b) tbe 
balance of accumulated net operating income shortfalls 
(and annual 12 percent interest on such shortfalls) is zero. 

• The year in which the Developer receives net sale 
proceeds less $25,000,000. 

• The 18 th anniversary date of the Project opening 
(projected to be approximately 2021 based on a Project 
opening of 2003). 

Subject to the ongoing negotiations with labor union 
representatives, the Developer could be obligated to prepay 
$1,000,000 of the City's participation revenue in accordance 
with provisions relating to Bloomingdale's department store 
labor relations. According to Mr. Smith, such prepayment 
would be applied to the last participation dollars otherwise 
payable to the City. 

13. The City's participation would be (a) capped at the total 
amount of Property Tax increment it had contributed, plus 
12 percent simple interest on that total contribution, and (b) 
limited to a maximum term of 99 years. The Developer 
would have the right to buy out or prepay some or all of the 
City's participation at any time. Mr. Smith notes that the 
99-year maximum term would cover a number of economic 
cycles, thereby protecting the City's participation against 
short-term economic downturns. Projections, however, 
estimate that full repayment of the City's Property Tax 
increment investment plus required interest would take 33 
years. According to Mr. Smith, the City's participation rights 
are associated with the mixed-use portion of the Project, and 
would continue even if some or all of the mixed-use portion of 
the Project was sold or transferred to other owners. 

14. Projections prepared by the Sedway Group for the 
Developer, and reviewed by Keyser Marston Associates on 
behalf of the City and the Redevelopment Agency, indicate 
that the City would be able to recoup fully its investment of 
Property Tax increment, plus an annual 12 percent simple 
interest return on its total investment, from the Project's 
cash flow and net refinancing proceeds. The City is 
estimated to receive (a) all of the principal amount of its 
Property Tax increment contribution (which would have been 
up to $27,000,000 in net present value as of the Project's 

Board of Supervisors 
Budget Analyst 



A1 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

opening) back from Project revenues within the first 24 years 
after the Project opens, and (b) the annual 12 percent simple 
interest return on its total Property Tax increment 
contribution between years 25 and 33 after the Project opens. 

Attachment VIII is a spreadsheet prepared by the Sedway 
Group summarizing the chronological breakdown of: 

• The Redevelopment Agency's estimated cumulative 
Property Tax increment contributions in the amount of 
$40,747,639 between Years 1 and 12, which has a net 
present value of $27,000,000 using an annual discount 
rate of 7.5 percent, discounted to the Project's opening. 

• The City's subsequent participation in net revenue in the 
amount of $42,741,661 between Years 19 and 24 
(assuming a sale or refinancing in the amount of 
$17,060,937 in Year 23) by which time the City is 
projected to be repaid an amount equivalent to the 
Redevelopment Agency's Property Tax increment 
contribution of $27,000,000 (net present value as of the 
Project's opening). 

• The City's subsequent participation in net revenue in the 
amounts of $76,578,791 between Years 25 and 33 by 
which time the City is projected to be paid a 12 percent 
simple interest return on the Redevelopment Agency's 
total Property Tax increment contribution of $27,000,000 
(net present value as of the Project's opening). 

Based on the assumed net revenue to be derived from the 
Project, and the projected 7.5 percent discount rate, the 
participation outlined in Attachment VIII equates to 
$27,000,000, plus 12 percent simple interest. According to 
Mr. Smith, the Sedway Group projections were reviewed and 
determined to be reasonable and accurate by Keyser Marston 
Associates, on behalf of the City and the Redevelopment 
Agency. 

Key Risks to the City 

15. According to Mr. Smith, the key risks to the City of 
proceeding with the proposed Project would be: 

• The proposed construction is either not completed or not 
opened, and therefore blight in the Emporium Site Area is 

Board of Supervisors 
Budget Analyst 






Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



not alleviated and the public benefits from the Project 
(including jobs and tax revenues) are not realized. 

• The subject portion of Jessie Street is vacated and 
conveyed to the Developer but the complex is not built. 

• The Redevelopment Agency's contribution of $27,000,000 
in Property Tax increment is more than the Project 
requires to be economically feasible due to, for example, 
better than expected Project revenues, lower than 
expected development costs, or higher than expected 
refinancing or sale proceeds. 

• Post-completion market conditions prevent the projected 
revenues to both the Developer and the City from being 
generated, thereby providing the City with neither the 
projected return on the Redevelopment Agency's 
investment of Property Tax increment, nor the projected 
public benefits (such as tax revenues, jobs, and economic 
revitalization). 

• The hotel is not built thereby reducing the number of jobs, 
the revenue, and the tax increment generated by the 
Project. 

• There is a disaster due to earthquake, fire, or some other 
catastrophic event which diminishes or delays the City's 
participation in Project revenues. 

With regard to the proposed Project not proceeding, Mr. 
Smith states that the key risks to the City would be that 
Bloomingdale's, Inc. keeps the Emporium Building vacant, 
that no development occurs, and that, therefore, the City 
does not receive the public benefits which would accrue from 
the proposed Project (as outlined in Comment No. 7 above). 

16. Mr. Smith advises that the proposed development 
contains the following provisions which would mitigate these 
risks: 

• There is the inherent financial risk to the Developer (and 
its parent company, Forest City Enterprises, Inc.), 
Bloomingdale's, Inc., and the construction lender of not 
completing the Project because the Developer, 
Bloomingdale's, Inc., and the construction lender would be 
committing significantly more private dollars than the 
Redevelopment Agency would be contributing to the 
Developer in Property Tax increment. 

Board of Supervisors 
Budget Analyst 



&T. 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



The subject portion of Jessie Street could not be conveyed, 
and escrow could not close, until the Developer has 
finalized its project financing, obtained the required 
permits, and met a number of other conditions to closing 
under the OPA/DDA 22 . 

Even if the subject portion of Jessie Street was conveyed 
but the complex was not built, the City would have 
received the $3,100,000 payment (the November of 1999 
appraised value of the property) and bonds or other 
security procured by the Developer to finance completion 
of the new Jessie Streets West and East, and an 
irrevocable offer to dedicate and convey fee title for the 
new street areas to the City. 

The City would have contributed only a projected 
$1,977,027 in Property Tax increment by the end of the 
28 month construction period (based on a fully completed 
Project). The City could seek to have the Redevelopment 
Agency require repayment under any new or amended 
Owner Participation Agreement for which new 
consideration is required if alternative development 
proposals were to be constructed instead. 
The following provisions in the Financing Agreement 
would mitigate against the risk of the Redevelopment 
Agency contributing more Property Tax increment than 
the Project needs to be economically feasible: (a) Property 



22 According to Mr. Smith, the vacation of the subject portion of Jessie Street would not become 
effective until the Yerba Buena Center Redevelopment Plan Amendment and the General Plan 
Amendment ordinances take effect, and the Developer (together with Bloomingdale's, Inc. where 
required) has: (a) irrevocably dedicated the property for Jessie Streets West and East to the City; (b) 
agreed to construct the new Jessie Streets West and East, including required public utilities, 
pursuant to a street improvement agreement and permit; (c) furnished bonds or other security 
acceptable to the City to guarantee completion of the new street areas; and (d) ensured that the City 
has interim easements to maintain access to public utilities located in the subject portion of Jessie 
Street, and pedestrian and vehicular access to adjacent properties until Jessie Streets West and East 
are constructed. 

The City proposes to sell and convey the subject portion of Jessie Street to the Redevelopment 
Agency for immediate sale and reconveyancing to the Developer. In turn, the Developer would (a) 
pay $3,100,000 directly to the City through escrow, and (b) dedicate, construct, and convey fee title to 
the City for Jessie Streets West and East. Therefore, according to Mr. Smith, the sale and 
conveyancing process is being held in two stages through a "simultaneous" escrow which ensures 
that the property is not conveyed to the Developer until all of the conditions for the commencement 
of the Project are satisfied. Mr. Smith states that this allows the Redevelopment Agency to serve as 
a clearinghouse for all of the closing conditions and helps protect the City's interest by ensuring that 
conveyance does not occur until the Developer is ready to begin construction. Neither the City nor 
the Redevelopment Agency would pay the transfer taxes and closing costs associated with the 
conveyance. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



64 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

Tax increment contributions could only commence after 
construction actually begins, (b) Property Tax increment 
contributions could be terminated early based on better 
than expected performance against refinancing proceeds 
or net sale proceeds benchmarks, and (c) the City's 
participation in Project revenues could begin early if the 
Project meets cash flow or net sale proceeds benchmarks 
earlier than expected. 

• If construction takes longer than 28 months (subject to 
force majeure 23 ), the Redevelopment Agency could require 
specific performance measures, as permitted under the 
OPA/DDA. 

• In the event of a disaster, the Developer would be obliged 
to restore up to the extent of insurance coverage 24 . 

• The maximum 99-year participation term would give the 
City time to fully recover its Property Tax increment 
contributions, plus annual 12 percent simple interest, 
even if there was damage to the complex or a market 
downturn. 

• The parent company, Forest City Enterprises, Inc., would 
provide the City with a completion guarantee so that it 
would complete the construction of the complex if the 
Developer fails to do so, subject to Forest City 
Enterprises, Inc. being able to obtain the necessary 
financing. If Forest City Enterprises, Inc., despite using 
its best efforts, cannot obtain financing, it could terminate 
its obligations to complete so long as it pays back the 
Property Tax contribution it has received from the 
Redevelopment Agency, the annual 12 percent simple 
interest on the total contribution, plus a termination fee 
of $1,000,000 if the Project is less than 50 percent 
completed. According to Mr. Smith, this guarantee is a 
condition of the close of escrow under the OPA/DDA. 

• The Developer has a financial incentive to have the hotel 
built (as outlined in "Description of the Project" above). 

• A Financing Agreement covenant obligates the Developer 
to use commercially reasonable efforts to (a) enforce its 



23 An unexpected event outside of a party's control which delays that party's ability to perform under 
a contract. 

24 According to Mr. Smith, the Redevelopment Agency's Risk Manager has approved the Developer's 
required insurance coverage. After Project completion, the Redevelopment Agency would review the 
Developer's insurance coverage every five years to check that the Developer's insurance coverage is 
commercially prudent (subject to the limitations specified in Section 7.3 of the Financing 
Agreement). 

board of supervisors 
Budget Analyst 



fi; 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

operating covenants for the hotel and the Bloomingdale's 
department store 25 , and (b) operate the mixed-use portion 
of the Project complex as required by its operating 
covenant with the City. If the Developer breaches this 
covenant, and the number of full-time equivalent jobs fall 
below levels specified in the Financing Agreement, the 
Redevelopment Agency would have the right to reduce its 
Property Tax increment contributions, or, if the Property 
Tax increment contribution term has ended, the City 
would have the right to accelerate the payment of 
participation. 

Related City and Redevelopment Agency Costs 

17. The City estimates its total costs of managing this 
proposed Project to be as follows: 

• Total expenses of up to approximately $350,000 to be 
incurred by the City Attorney's Office in relation to the 
transaction documents. These expenses would be 
reimbursed by the Developer. 

• Total expenses of approximately $350,000 expected to be 
incurred by the Redevelopment Agency for outside 
counsel. These expenses could be covered by the existing 
Yerba Buena Center Redevelopment Area budget, 
according to Mr. Carney. 

• Annual expenses incurred by the Redevelopment Agency 
for the costs of monitoring the Project. These expenses 
would be reimbursed by the Developer in the amount of 
$65,000 for each of the first three years in which the 
Developer receives Property Tax increment, then $50,000 
for each of the next four years, and then $35,000 annually 
until the end of the Property Tax increment contribution 
period (all amounts indexed for up to 3 percent annual 
inflation). 

• Total expenses of approximately $15,000 incurred by the 
Real Estate Division of the Department of Administrative 
Services in processing the sale of the subject portion of 
Jessie Street. These costs would be reimbursed by the 
$3,100,000 Jessie Street sale proceeds. 



25 Under the Covenant to Operate contained in Section 6.1(a)(i) of the Financing Agreement, 
Bloomingdale's, Inc. is required to operate a Bloomingdale's department store for a minimum often 
years after the Project's opening date, and a Bloomingdale's or other department store for a 
minimum five additional years. 

Board of Supervisors 
Budget Analyst 



6A 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

Summary: Emporium Development L.L.C. has proposed redeveloping 

the site of the former Emporium Building and adjacent 
warehouses and office buildings as a 1,607,000 gross square 
foot multi-story complex comprising retail, entertainment, 
restaurant, cinema, office, and hotel complex. Construction 
is scheduled to take 28 months, and would involve restoring 
historically significant portions of the former Emporium 
Building and constructing underground links to the Powell 
Street MUNI and BAKT station. The Project is projected to 
increase the value of the site by $516,210,742, from its 
current assessed valuation (for Property Tax purposes) of 
$69,957,924 to $586,168,666. This projected increase in the 
assessed valuation would result from improvements funded 
by a combination of private investment and Redevelopment 
Agency Property Tax increment contributions. 

According to independent real estate economics consultants, 
despite the currently strong San Francisco real estate 
market, none of the six development plans proposed for the 
Emporium Site Area would be economically feasible without 
a public subsidy because of what they term the 
"extraordinary costs" associated with retaining and restoring 
the Emporium Building, site assembly, relocation of utilities, 
and construction of new streets. For a developer to achieve 
an annual 12 percent rate of return on the cost of this 
Project, the real estate economics consultants have identified 
a "feasibility gap" of $32,800,000, a funding shortfall which 
they believe would require public funding. 

In response to this identified "feasibility gap", the 
Redevelopment Agency proposes to contribute Property Tax 
increment funds up to the amount of $27,000,000 (in net 
present value as of the date the Project opens) to reimburse 
the Developer for expenditures which alleviate blight and 
provide public benefits such as historic preservation costs, 
site assembly and preparation, transit and circulation 
improvements, and economic revitalization and job creation. 
The amount of $27,000,000 was determined through 
negotiations between the City, the Redevelopment Agency, 
and the Developer. 

The Budget Analyst has received extensive economic analysis 
related to the Developer's need for the Redevelopment 

Board of Supervisors 
Budget Analyst 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

Agency's proposed Property Tax increment contribution of up 
to $27,000,000 to ensure the viability of the proposed project. 
However, none of the six development scenarios for which 
economic analyses were prepared contain information on 
Bloomingdale's, Inc.'s future plans for this valuable, centrally 
located site if the proposed Project did not proceed with the 
assistance of the Redevelopment Agency's Property Tax 
increment contribution. Therefore, the Budget Analyst is 
unable to determine the extent to which the asserted need for 
the Redevelopment Agency's proposed contributions of 
$27,000,000 in Property Tax increment to the Developer is 
necessary for the development of the property. 

Projections indicate that the City would be able to recoup 
fully its investment of Property Tax increment, plus an 
annual 12 percent simple interest return on its total 
investment, from the Project's cash flow and net refinancing 
proceeds. The City is projected to receive (a) all of the 
principal amount of its Property Tax increment contribution 
(which would have been up to $27,000,000 in net present 
value as of the Project's opening) back from Project revenues 
within the first 24 years after the Project opens, and (b) the 
annual 12 percent simple interest return on its total 
Property Tax increment contribution between years 25 and 
33 after the Project opens. 

The key risks to the City of proceeding with the proposed 
Project would be: 

• The proposed construction is either not completed or not 
opened. 

• The subject portion of Jessie Street is vacated and 
conveyed to the Developer but the complex is not built. 

• The Redevelopment Agency's contribution of $27,000,000 
in Property Tax increment is more than the Project 
requires to be economically feasible. 

• Post-completion market conditions prevent the projected 
revenues to both the Developer and the City from being 
generated. 

• The hotel is not built. 

• There is some catastrophic event which diminishes or 
delays the City's participation in Project revenues. 



Board of Supervisors 
Budget Analyst 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

The proposed Project contains a number of risk mitigation 
provisions, which are described in Comment No. 16 above. 

The City estimates its total costs of managing this proposed 
Project to be as follows: 

• Up to $350,000 to be incurred by the City Attorney's 
Office in relation to the transaction documents (to be 
reimbursed by the Developer). 

• Approximately $350,000 expected to be incurred by the 
Redevelopment Agency for outside counsel (to be covered 
by the existing Yerba Buena Center Redevelopment Area 
budget). 

• Annual expenses incurred by the Redevelopment Agency 
for the costs of monitoring the Project (to be reimbursed 
by the Developer). 

• Approximately $15,000 incurred by the Real Estate 
Division of the Department of Administrative Services (to 
be reimbursed by the $3,100,000 Jessie Street sale 
proceeds). 

Recommendation: Approval of the proposed resolutions is a policy matter for 
the Board of Supervisors. 



Board of Supervisors 
Budget Analyst 



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EXISTING PROJECT BOUNDARY 
PROPOSED ADDED AREA 



NOTE. The Amenoeo Area esnsisu c< Te Er.ssrg Pxiec Area 
and T.e Prcpcsec Acses Araa 



YE3SA 5LENA GMTE5 KECVEOMefl HbOJEG USA 
FIGURE 1-2: EXISTING REDEVELOPMENT PROJECT AND THE PROPOSED ADDED ARf 



PUG. 17.2000 12:02PM S F R fl 



At tac mn em: xv 
Page 1 or 1 



SanFfancisca 
Redevelopment Agency 

noGoWsnGjieAveniM 
San rrcnclsca, CA 94102 



4117412400 
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August 17, 2000 



Karvey M. Rose 

Board of Supervisors Budget Analyst 

City Hall 

1 Dr. Carlton B. Goodlett Place 

San Francisco, CA 94102 

Dear Mr. Rose, 

The proposed Yerba Buena Plan Amendment modifies the existing Yerfaa Buena Redevelopment 
Plan by expanding the Project Area boundaries to include the adjacent Emporium Site Area: 
making a major department store and mixed- use retail, entertainment, office and hotel 
development on the Emporium Site Area an objective of the Redevelopment Plan; providing for 
tax-increment financing up to $27 million (in net present value at the date of opening) to be 
derived only from the Emporium Site Area if needed to make the proposed development 
feasible; and incorporating significant portions of the Planning Code as the Development 
Standards for the Emporium Site Area, with modifications necessary to accommodate the 
proposed redevelopment of the area. 

To accomplish the proposed redevelopment, the Plan Amendment modifies the Planning Code 
requirements that would otherwise apply for the Emporium Site Area in the following ways: 

Use 

■ Allows hotel and office as permitted uses (instead of conditional uses). 

■ Provides for "interval hotel suites" and for their conversion to residential use (subject to 
parking, open space and affordable housing requirements similar to those in the Code). 

These uses could be granted under the current Code, and the Plan Amendment process 
provides a greater degree of public review then does the conditional use process. 

Density, height and bulk 

■ Provides a base Floor Area Ratio (FAR) of 9:1 with no additional increase for Transferable 
Development Rights (TDRs) (current base is 6:1, increasing to 9:1 with TDRs). 

■ Increases height and bulk limits to 135-X, 200-X and 400-X (com 120-X, 160-X and 160-F). 

The FAR change provides for the amount of development necessary to make the 
redevelopment of the site economically feasible, within the maximum development envelov 
allowable on the site under the current Code. Tne height ctonges allow for adjustments to 



^ „ „ Attach ment IV 

PUG. 17.2200 12:03PM SFRA Page 2 Ol '2 



accommodate the relocation of the Emporium Building dome and to create a more slender 
and graceful hotel tower compatible wth the adjacent towers of the Yerba Bvena Center. 

Historic preservation 

■ Provides for a specific program for reraining, restoring, rehabilitating, and adaptivcly reusing 
the historically significant features of the Emporium Building, in lieu of Article 11. 

In finding the proposed Plan Amendment consistent with the General Plan, the Planning 
Department has determined that the Emporium Building has no substantial remaining -value 
and therefore could be subject to demolition. However, the Plan Amendment specifically 
provides for retaining the historically significant features of the building, including the 
Market Street facade, the historic office portion of the building and the dome and rotunda. 

Other provisions 

■ Reduces off-street freight and bus loading requirements in accordance with the demand 
analyses in the Project EER. 

■ Allows minor shadowing of Hallidie Plaza in light of the limited nature of shadowing 
established in the Project EIR 

■ Allows miner exceedances of wind comfort standards in light of the limited nature of wind 
impacts as described in the Project EIR. 

■ Retains Article 6 regarding signs, but allows certain exceptions based on compelling design or 
architectural justification 

The first three items could be granted as exemptions under the current Code, and the Plan 
Amendment process provides the same level of analysis by the Planning Department and a 
greater degree of public review than does the exemption process. The sign item provides the 
Planning Department and the A.gency with the discretion to provide higher signs and greater 
projections for awning signs based on compelling design or architectural justification 

Since the Plan Amendment provides that the Planning Code acts as the basic development 
controls in the Emporium Site Area, design review and approval of the project will be conducted 
by the Planning Department, in accordance with a Delegation Agreement with the 
Redevelopment Agency. The Delegation Agreement is intended to assure that the Planning 
Code, as modified, is applied to the Emporium Site Area in a manner consistent with other areas 
in the City. 

Please call me at 749-2412 should you have any further questions. 

Sincerely, 

William Carney 
Senior Project Manager 
Yerba Buena Center 



PiUG. 17.2000 12-.03FM SFRfi 

SanFrandsca 

RedMsiopmeul Agency 

770 Golden Gate Avowe 
San incises. Zx 9-4102 



4117412400 
HY 415.7-11200 



ft LLdtlll;:a:U 

Page 1 ot i 




WlLISt. SHOWN, JR, Mayor 

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August 17, 2000 



Harvey M. Rose 

Board of Supervisors Budget Analyst 

City Hall 

1 Dr. Carlton B. Goodlett Place 

San Francisco, CA 94102 

Dear Mr. Rose, 

In response to the request from your office, the following provides descriptions of the six 
redevelopment alternatives analyzed for the proposed Emporium Site Area. Economic analysis 
conducted by Sedway Group and confirmed by Keyser Marston Asociates determined that all the 
alternatives, except the preferred alternative, were infeasible without substantially greater financial 
assistance. 



Preferred Alternative - The Preferred Alternative includes new retail, entertainment, 
restaurant, cinema, office and hotel uses. The Project would retain, rehabilitate, and restore 
the Market Street facade (to a depth of 65 feet) and the existing dome and rotunda of the 
Emporium Building. The project would demolish and replace other existing buildings 
between Market and Mission streets, would relocate existing office uses within the new 
building, and would require the City to vacate a portion of Jessie Street. The Preferred 
Alternative includes 277,500 square feet of gross leasable area (GLA) of retail space, 
97,000 square feet (GLA) of entertainment space, 225,000 square feet (GLA) of office 
space, a 355,500 square foot (GLA) Bloomingdale's department store, and a 375,000 
square foot 210-room hotel and 60-unit interval vacation ownership component 

EIR Alternative C - This alternative preserves the exterior and interior of the Emporium 
Building and the Annex Building including the Jessie Street facades. Jessie Street becomes 
a glass-enclosed "gallery" with bridges connecting the development on either side. 
Development on the south side is limited to a four-story base and seven-story tower. This 
alternative includes 255,500 square feet (GLA) of retail space, 164,700 square feet (GLA) 
of office space, and a 357,000 square foot (GLA) Bloomingdale's department store. 

EIR Alternative D - This alternative also preserves most of die Emporium Building, but 
would allow selective demolition of the Jessie Street facade, as well as demolition of the 
Annex Building. Some floors of the new addition would span Jessie Street. Development 
south of Jessie Street would also be limited to a four-story base and seven-story tower, 
although somewhat bulkier than under Alternative C. This alternative includes 136,800 



AUG. 17.2000 12--03PM SFRfl Page 1 Ot* 'I ' 



square feet (GLA) of retail space, 80,000 square feet (GLA) of entertainment space, 

1 13,300 square feet (GLA) of office space, a 401,500 square foot (GLA) Bloomingdalc's 

department store, and a 196-room, 174,000 square foot hotel. 



• EER. Alteraarive E - This alternative, also known as the Existing Planning Controls 

I Alternative, preserves the Emporium and .Annex buildings, but maximizes the development, 

to the event pennmed under existing planning controls, in the area south of Jessie Street. 
This alternative includes 272,300 square feet (GLA) of retail space, 39,100 square feet 
(GLA) of entertainment space, 257,200 square feet (GLA) of office space, and a 360,200 
square foot (GLA) Bloomingdale's department store. 

• Historic Preservation Alternative (Retail) - This alternative encompasses only the historic 
Emporium retail store, which would be historically renovated for primarily retail, with 
some office space. 

• Historic Preservation Alternative (Office) - This alternative encompasses only the historic 
Emporium retail 3tore, which would be historically renovated for primarily office, with 
some retail suace on the first two floors. 



Please call me at 749-2412 should you have any further questions. 



Sincerely, 



/Zif***'*^' 



William Carney, 
Senior Project Manager 
Yerba Buena Center 



GLG-1S-2000 12:27 

Attachment- VI 



EXHIBIT 1 

SUMMARY OF HISTORIC RETENTION 

AND 

RESTORATION COSTS 

(Based an Swinerton & Walberg 3/16/00 Cost Estimates) 



Dome and Rotunda Restoration S4.03 6 

Market Street Facade 1,920 

Historic Building Retention J .021. 

Subtotal - Hard Costs per Swinerton Estimates 13,977 

Construction Contingency @ 10% 1.398 

Subtotal 15,575 

Indirect Costs © 19 J% 1 3,002 

Total Development Cost Before Financing 1 8,377 

Financing Costs @ 19 2% 2 13.56 

Total Development Cost S21.333. 



1 Percentage rate estimated to include architectural, engineering, legal, insurance, taxes, public 
permits and fees, development management fees, and EER. Actual architectural and engineering 
costs will likely be disproDortionately high for historic work. 

2 Average rale per project pro forma ( 3j,27 °A73,occ)- As many of the historic preservation costs 
will occur, early on, Ihe actual carrying costs will probably be higher. 

MQJO.OOI OOJOj 



Attachment \ 






Federated 

DEPARTMENT STORES, INC 7 W.« Sev«th Scr-t . Cboruuri. Ohio 45i0j-J471 



tg.' September 9, 1999 

ft. 



Mr. BUI Carney 

San Francisco Redevelopment Agency 

770 Golden Gate Avenue 

San Francisco, California 94102 

Subject: 835 Market Street and Aaeodated Properdea 

DcarBiU: 

Federated Department Stores, through ita cubtidiary Bloomingdalc'a, Inc. successor to Broadway 
Stores, Inc., is the owner of the Emporium Building at 835 Market Street, Assessor's Block No. 
3705, Lot No. 43, and other properties on this block formerly used tn conjunction with the 
Emporium Department Store, specifically, Lots Nos. 13 through 1 8, 33 and 38. 

Federated acquired Broadway Stores Inc. in 1995. Due to significant losses, the Emporium 
Department Score was closed shortly thereafter. 

Obviously, tho subject property is a significant asset which Federated would very much like to put to 
productive use. In the nearly 4 years since our acquisition of Broadway Stores, Federated has 
thoroughly analyzed the potential for rehabilitation of the Emporium Building and associated 
properties for use as a department store. Based on this analysis, we have concluded that the 
tremendous investment which would be required to rehabilitate the building as a department store 
cannot be economically justified. In short, the cost to bring to modem department store standards 
the historic, unreinfbrced masonry building, with its closely spaced columns and other challenges, is 
simply prohibitive. 

For this reason, we sought the assistance of Forest City Development to help Identify a developable 
project for the Emporium property and other property, and to carry out the development of a new 
department store and complementary uses. 

Please do not hesitate to call, if I can be of any further assistance. 




VicePresi 

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Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 






Item 7 - File 00-1479 

Department: 

Item: 



Amount: 
Source of Funds: 

Description: 



Public Utilities Commission (PUC) 

Resolution approving tbe expenditure of $558,000 for 
emergency work to design and construct slope and stream 
bank restoration and an energy dissipation structure in 
the San Mateo Creek. 

$558,000 

Previously appropriated surplus FY 1999-2000 Water 
Enterprise Capital Project Funds. 

On June 24, 1999, the PUC declared an emergency, 
requiring immediate stream bank restoration and 
installation of an energy dissipation structure 1 at an 
eroded stream bank in San Mateo Creek, at the base of 
the Crystal Springs Dam. The erosion was caused by 
discharge pipes used to regulate the volume of water in 
the Crystal Springs Reservoir. According to Mr. Nelson, 
prior to the commencement of construction on the Project, 
California Red-Legged Frogs, a species currently on the 
federal Endangered Species list, were discovered at the 
construction site. The PUC was forced to delay the 
project until appropriate environmental permits from the 
California Fish and Game and the U.S. Fish and Wildlife 
Departments could be obtained. By the time these 
permits were obtained, there was insufficient time 
remaining for planned construction, so the PUC opted to 
delete construction of the dissipation structure and to 
proceed with stream bank restoration, which could be 
completed by the California Fish and Game Department's 
October 15 deadline. 

Because of very high rainfalls in the winters of 1997 and 
1998, large amounts of water were released from the 
Crystal Springs Dam discharge valves during those 
periods. The releases resulted in a partial undermining of 
the slope above the stream bank. Without the repair 
performed under this declaration of emergency, future 



1 An energy dissipation structure is a structure designed to slow and dissipate water discharges to 
prevent erosion. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



releases of excess water would have resulted in erosion 
that would likely have caused increasing portions of the 
slope above the stream to fall into San Mateo Creek. The 
emergency work was therefor undertaken in the fall of 
1999 so that it would be completed before the start of the 
1999 rainy season. 

In accordance with Section 6.30(2) of the Administrative 
Code of the City and County of San Francisco, the PUC 
initiated expedited contract procedures and awarded a 
contract to JMB Construction, Inc. for construction and 
design work on the emergency project. The project was 
completed on October 15, 1999. 

The proposed resolution would approve the expenditure of 
$558,000 for emergency work to design and construct 
slope and stream bank restoration and erosion protection 
for the San Mateo Creek. 



Budget: 



The total project costs 
$558,988.86 is as follows: 



for this emergency work of 



Design and Construction Contract $410,515.86 

Environmental Services Consultant 77,088.00 

Construction Management, performed by 41,600.00 

PUC 

Project Management, performed by PUC 29,785.00 

Total $558,988.86 



Comments: 



Attachment I, provided by the PUC, contains expenditure 
details for the design and construction contract. 
Attachment II, provided by the PUC, contains details 
regarding environmental services (see Comment No. 4). 
Attachment III, provided by the PUC, contains details 
regarding project management performed by the PUC. 

1. According to Mr. Chris Nelson of the PUC, two bids 
were received by the PUC for the subject emergency work. 
The PUC reports that JMB Construction, Inc., a certified 
woman business enterprise firm (WBE), submitted the 
lowest bid and was awarded the contract in the amount of 
$503,300. Mr. Nelson states that subsequent to the 
award of the contract, the nature and type of repair work 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

needed for tbe project changed. The construction work 
actually completed on the project totaled $410,515.86. 

2. Mr. Nelson states that the repairs, which were 
completed in October of 1999, are tempoiary in nature, 
and that eventually a permanent energy dissipation 
structure will need to be constructed. According to Mr. 
Nelson, funds for this construction project were included 
in the PUC FY 2000 - 2001 Capital Projects budget. 

3. According to the documents provided by the PUC, the 
cost for the subject project is $558,988.86. The proposed 
resolution states that the project cost is $558,000. 
Therefore, the proposed resolution should be amended to 
provide for the correct project cost of $558,988.86 instead 
of $558,000. 

4. According to Mr. Nelson, the environmental services 
consultant, EA Engineering, Science, and Technology, 
was selected for the subject project because they have a 
continuing contract with the City, and are utilized on an 
as-needed basis. Mr. Nelson states that the expenditures 
of EA Engineering, Science, and Technology shown in 
Attachment II do not include a) unanticipated cost 
overruns in the amount of $7,807, which include 
increased coordination due to project alteration and 
unanticipated permit fees, and b) $3,299 in project 
management and coordination costs borne by the 
Department of Public Works, Bureau of Construction 
Management, which oversaw the environmental services 
consultant contract. These two expenses, when added 
with the $65,982 in expenditures shown in Attachment II, 
result in a total environmental services cost of $77,088. 

Recommendations: 1. Amend the proposed resolution to increase the project 

cost from $558,000 to $558,988.86 to reflect the actual 
project cost (see Comment No. 3). 

2. Approve the proposed resolution, as amended. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



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MATEO CREEK RESTORATION PROJECT/CRYSTAL SPRINGS PUMPING KAC1 

femuaum and biatopcat assasBuiu snpparrfor cruJt bank erosion rspoir 



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Attachment II 




WATER 

HETCM MlTCKf 

Watm a POWER 

clean Water 



wna» l_ Ercvvrt, Jr. 

IMAVOM 

E. Cmnr*n Ncrmaney 

VlctcrG. N.(mkrma 

Fr«nKt_ Cooic 
Ann MoJl«rCMn 

A*->ck Kumar 3ru»tt 

Jonn P. hmiuna, jr. 

QCNCKAL MAMMCR 

Mcf»^ E. Cuan 

Makaccji 



San Francisco Public Utilities Commission 

Utilities Engineering Bureau 

I QOQ CL CuwO mm. Mil i ■■««-, Dunaxu 9^020 

to. taaai ot=-5*b* • f-** taaai n-7i-3cos • mw.u.t,. ouua 



MEMORANDUM 




Date: 

To: 

From: 

Subject 



September 12, 2000 

Daley Dunham, Budget Analyst's Officer 

Chris Nelson A^ l / kJ^* a ^~^~' 

S7WD Project W112-43, Contract WD2306E 
Sao Mateo Creek Bank Restoration & Enerjj 
Dissipation Structure 



This is to provide detail of Total Project Costs. Consultant design services and 
construction work, both performed under Contract WD2306E, made ud the 
majority of Project Costs, S4 10,5 15. Errvironmcrital consulting and biological 
monitoring was provided through a DPW as-needed Contract at rhe total cost of 
577,100. The renaming 570,385 that was charged against the project was for 
PUC staff costs for construction management and inspection services (54 1 6QQ) 
and for project management (529,785) for a project total cost of 5557 900; * 
SFPUC construction management and inspection services were provided bv 
Construction Inspectors, classification 6313, who charged a total of 595 houn at a 
rate of S69.92 per hour. SFPUC project managemerxt services were provided bv a 
Project Manager E, classification 5504, who charged a total of 336 hours at a raff 
ofS33.72. 

Please call me at 650 872 5985 should you need any further information. 



^Actual project total is S558.988.86. 



Memo to Finance and Labor Committee 
September 20, 2000 Finance and Labor Committee 

Items 8, 9 and 10 - Files 00-1429, 00-1430. 00-1431 



Department: 



Items: 



Department of Administrative Services (DAS) 
Division of Real Estate (DRE) 

Item 8. File 00-1429 : Resolution authorizing and 
approving a lease of cellular transmitter space at the 
Performing Arts Garage to Sprint Spectrum Limited 
Partnership. 

Item 9, File 00-1430 : Resolution authorizing and 
approving a lease of cellular transmitter space at the Pierce 
Street Garage to Sprint Spectrum Limited Partnership. 

Item 10, File 00-1431 : Resolution authorizing and 
approving a lease of cellular transmitter space at the Fire 
Department Station 43 to Sprint Spectrum Limited 
Partnership. 



Locations: 



Item 8. File 00-1429 : The Performing Arts Garage, 
administered by the Parking Authority and located on the 
northeast corner of Grove and Gough Streets (Assessors 
Block 792, Lot 29). 

Item 9. File 00-1430 : The Pierce Street Garage, 
administered by the Department of Parking and Traffic and 
located on Pierce Street, between Lombard and Chestnut 
Streets (Assessor's Block 490, Lots 9-13). 

Item 10. File 00-1431 : Fire Department, Station 43, 
located at 720 Moscow Street, between France and Italy 
Streets (Assessor Block 7338, Lot 24). 



Purpose of Leases: To allow Sprint Spectrum Limited Partnership to place 
cellular telephone transmitters on several City buildings 
(discussed below). 



Lessor: 
Lessee: 



City and County of San Francisco 

Sprint Spectrum Limited Partnership (SSLP) 



Memo to Finance and Labor Committee 
September 20, 2000 Finance and Labor Committee 



No. of Sq. Ft. and 

Rent Per Month: Item 8. File 00-1429: 



Approximately 375 square feet at 
$3,000 per month ($36,000 annually) 

Item 9. File 00-1430 : 

Approximately 500 square feet at 
$3,000 per month ($36,000 annually) 

Item 10. File 00-1431 : 

Approximately 250 square feet at 

$2,500 per month ($30,000 annuaDy, see Comment No. 1) 



Annual Rent Payable 

by Sprint Spectrum to 

The City: Items 8 and 9. Files 00-1429 and 00-1430 : 

$36,000 per year, per lease 

Item 10. File 00-1431 : 

$30,000 per year (see Comment No. 1) 

Beginning in the year 2001, and for the remaining four 
years of each of the three proposed leases, the base rent will 
be adjusted every July 1 st by the annual percentage 
increase in the Consumer Price Index (CPI). The monthly 
base rent on or after the adjustment date cannot be less 
than the monthly base rent in effect immediately prior to 
the adjustment date. 

Term of Leases: The three proposed leases with Sprint Spectrum would 

commence upon approval by the Board of Supervisors and 
the Mayor, and the earlier of: (1) 30 days following the 
tenant's written notice to the City that it has obtained all 
permits and approvals necessary for the tenant to be legally 
entitled to construct a facility for providing cellular 
telephone services; or, (2) 30 days following the date the 
tenant begins construction of the communications faculties 
for those phases for which SSLP has already received 
building permits (e.g. electrical wiring). The proposed 
leases are expected to commence in Fall of 2000 and would 
expire five years after the commencement date (in Fall of 
2005). 



90 



Memo to Finance and Labor Committee 
September 20, 2000 Finance and Labor Committee 



Rights of Renewal: 



Under the terms of each of the proposed leases, the tenant 
would have three options to extend each lease for five 
years, for a total maximum lease term of 20 years per lease. 
Prior to each 5-year option, the base rent would be adjusted 
to equal the fair market rent of the subject property. This 
adjustment would be determined by the Department of 
Real Estate (DRE), using a market survey approach for 
comparable space leased for cellular telephone 
transmitters. Attachment I, provided by DRE, states how 
DRE sets its rental rates for such cellular telephone 
transmitters. 



Utilities and Janitorial 

Provided by Lessor: The lessee will pay for the costs of all utilities and janitorial 
services for each of the three proposed leases. 



Tenant 
Improvements: 



Descriptions: 



Upon commencement of the subject leases, SSLP will 
install at its own cost its cellular equipment on the three 
subject City buildings. 

Item 8, File 00-1429 : The proposed resolution would 
authorize a 5-year lease between the City and Sprint 
Spectrum Limited Partnership (SSLP) for space on top of 
the Performing Arts Garage, located on the northeast 
corner of Grove and Gough Streets (Assessors Block 792, 
Lot 29). 

Under the subject lease, SSLP proposes to construct and 
maintain a cellular telephone transmitter, including six 
transmitter cabinets on the top deck of the Performing Arts 
Garage and nine antennae panels attached to the outside of 
the parapet surrounding the garage's top deck. 

Item 9, File 00-1430 : The proposed lease would authorize 
a 5-year lease between the City and SSLP for space on top 
of the Pierce Street Garage, located on Pierce Street, 
between Lombard and Chestnut Streets (Assessor's Block 
490, Lots 9-13). 

Under the subject lease, SSLP proposes to construct and 
maintain a cellular telephone transmitter on the top deck of 
the Pierce Street Garage, including six antennae and the 



Memo to Finance and Labor Committee 
September 20, 2000 Finance and Labor Committee 

placement of a transmitter room containing seven cabinets 
above the stairway in the rear of the parking lot. 

Item 10, File 00-1431 : The proposed lease would authorize 
a 5-year lease between the City and SSLP for space on top 
of the Fire Department Station 43, located at 720 Moscow 
Street, between France and Italy Streets (Assessor Block 
7338, Lot 24). 

Under the subject lease, SSLP proposes to construct and 
maintain a cellular telephone transmitter on the roof of the 
Fire Station, including seven transmitter cabinets and nine 
antennae. 

Comments: 1. According to Mr. Larry Jacobson of DRE, the proposed 

rental rate of $3,000 per month for the first two proposed 
leases at the Performing Arts Garage and the Pierce Street 
Garage (Items 9 and 10, Files 00-1429 and 00-1430) and 
$2,500 per month for the third proposed lease at the Fire 
Department Station 43 (Item 11, File 00-1431) represent 
the DRE's current rate for cellular communication site 
leases and are considered to be fair market value. 
Attachment I, provided by DRE, states how DRE 
determines the market rate for cellular transmitter space. 
According to Mr. Jacobson, the rental value of a cellular 
communication site is based on the service provided to 
cellular phone users and the amount of potential phone 
traffic at specific locations, not on the basis of square feet. 
The rentable area at each of the three proposed leases 
varies in size due to the differing size specifications of the 
equipment needed at each location. The $3,000 monthly 
rent for each of the first two leases (Performing Arts 
Garage and the Pierce Street Garage) is $500 more per 
month than the $2,500 monthly rent for the third lease 
(Fire Department Station 43) because the first two leases 
would allow SSLP to service more vehicles than would the 
third lease, according to Mr. Jacobson. 

2. Mr. Jacobson advises that DRE does not complete a 
competitive bidding process for awarding leases for cellular 
transmitter space. As stated in Attachment II, provided by 
DRE, SSLP selected the subject sites as part of the 
company's City cellular coverage plan. SSLP then 
requested to lease the cellular transmitter space from the 



Memo to Finance and Labor Committee 
September 20, 2000 Finance and Labor Committee 



City, as is the regular procedure, according to Mr. 
Jacobson. 

3. According to Mr. Jacobson, at each of the three proposed 
locations there is sufficient space for a second cellular 
phone company to place a transmitter and antenna, as is 
required by the Federal Communications Commission 
(FCC). 

4. According to Mr. Richard Lee of the Department of 
Public Health (DPH), Environmental Health Section, DPH 
reviews a Radio frequency Radiation Ambient Report for all 
requests for cellular transmitter space on City and private 
property in the City. Mr. Lee reports that DPH reviewed 
reports for the three subject leases to ensure that the radio- 
frequency radiation levels of each cellular transmitter 
would comply with standards set by the FCC and the 
America National Standards Institute (ANSI). 

5. Each of the three proposed resolutions authorizes the 
Director of Property to "...enter into any amendments or 
modifications to the Lease... that the Director of Property 
determines, in consultation with the City Attorney, are in 
the best interest to the City, do not increase the rent or 
otherwise materially increase the obligations or Labilities 
of the City, are necessarily advisable to effectuate the 
purposes of the lease or this resolution, and are in 
compliance with all applicable laws, including the Charter." 

6. Item 12, File 00-1432, of this report to the Finance and 
Labor Committee also pertains to a lease for cellular 
transmitter space between the City and Nextel 
Communications. 



Recommendation: Approve the three proposed resolutions. 



Attachment I 



City 'and County of San Francisco 




Real Estate Division 
Administrative Services Department 



MEMORANDUM 




DATE: August 17, 2000 

TO: Emily Newman 

Budget Analyst Office 



FROM: Larry Jacobson 

Real Estate Division 



SUBJECT: Cell Phone Transmitter Rental Rates 

This memorandum is to inform you of the three fees currently applied to cell phone transmitter 
sites that are large enough for a second cell phone company to co-locate and put a second 
transmitter in operation. 

• 55,000.00 per month: Sites adjacent to US 101 Freeway, I-S0 and Bay Bridge approach 
as well as Doyle Drive and the Golden Gate Bridge, e.g., Hall of Justice, San Francisco 
General Hospital. Rent is based upon traffic counts of 92,000,000 vehicles per annum 
on US 101/1-30, and 44,000,000 vehicles per annum on the Golden Gate Bridge. 

• 53,000.00 per month: Site covering neighborhoods, e.g., Visitacion Valley, Excelsior, 
etc, which have large coverage area but low vehicle count on the streets, as well as 
major high volume streets, e.g., Oak, Fell, Gough, Franklin, Lombard, etc. Rent is 
based upon Oak-Fell, 25,000,000 vehicles per annum; Gough-Franklin, 22,000,000 
vehicles per annum; and Lombard, 13,000,000 vehicles per year. 

• 52,000-2,500 per month: Micro coverage for sites in geographically hard to reach areas 
such as Civic Center Plaza, Laguna Honda Boulevard at Dewey Boulevard intersection, 
three million vehicles per annum 



If you have any questions please call me at 554-9863. 



I/LJ/«!!ph transmtr rent! BudgtAnalys /wtc 



(415)554-9350 
FAX: (415) 552-9215 



Office of the Director of Property 
25 Van Ness Avenue, Suite 400 



San Francisco, CA S 



City and County of San i-rancisco 




Attachment II 



neai estate wivisiuii 

Administrative Services Department 



MEMORANDUM 



DATE: 


September 1, 2000 


TO: 


Emilie Neumann 
Budget Analyst' 3 Office 


FROM: 


Larry Jacobson 

Senior Real Property Office 



SUBJECT: Siting Cellular Phone Transmitters; 

Reason it is impractical to request bids 



Each cellular phone company establishes it3 own set of cells; each cell covers a finite 
geographic area. The area of the cell, generally round, is affected by both topography and 
the amount of telephone traffic within any geographic area. 

Cellular phone companies have different cell configurations. The cellular phone company 
determines where to place the transmitter and approaches the property owner. 

The City and County of San Francisco can often- accommodate cell phone companies on 
City property - but not always. There may be problems such as finding space for the 
transmitter equipment, 24-hour access, proximity to neighboring apartment houses, etc. 
Since cellular phone companies have differing needs for siting cell phone transmitters, it is 
impractical to request bids for a specific site since generally only one company has an 
interest in a selected site. 

Finally, FCC requirements provide for co-location of cell phone equipment. The companies 
doing business in San Francisco have approached the City on a number of occasions seeking 
co-location; however, to date co-location has not occurred on City property. 



iAisci3/LI/c=llph '-rannntr siting Budgt Analyi /vrtc 



(415)554-9850 
FAX: (415) 552-9216 



Office of the Director of Property 
25 Van Ness Avenue, Suite 400 



San Francisco, CA 94' 

TOTfiL P. 01 



Memo to Finance and Labor Committee 
September 20, 2000 Finance and Labor Committee 



Item 11 -File 00-1432 
Department: 

Item: 

Location: 
Purpose of Lease: 



Lessor: 

Lessee: 

No. of Sq. Ft. and 
Rent Per Month: 



Department of Administrative Services (DAS) 
Division of Real Estate (DRE) 

Resolution authorizing and approving a lease of cellular 
transmitter space at the San Francisco General Hospital 
Parking Garage to Nextel Communications. 

The San Francisco General Hospital Parking Garage, located 
at 23 rd and Utah Streets (Assessor's Block 4219, Lot 1). 

To allow Nextel Communications to place cellular telephone 
transmitters on the San Francisco General Hospital Parking 
Garage. 

City and County of San Francisco 

Nextel Communications 



Approximately 150 square feet, at $3,000 per month 
($36,000 annually, see Comment No. 1) 



Annual Rent Payable 

By Nextel Communications 

to the City: $36,000 annually. Beginning in the year 2001, and for the 

remaining four years of the lease, the base rent will be 
adjusted every July 1 st by the annual percentage increase in 
the Consumer Price Index (CPI). The monthly base rent on or 
after the adjustment date cannot be less than the monthly 
base rent in effect immediately prior to the adjustment date. 

Term of Lease: The proposed lease with Nextel Communications would 

commence upon approval by the Board of Supervisors and the 
Mayor, and the earlier of: (1) 30 days following the tenant's 
written notice to the City that it has obtained all permits and 
approvals necessary for the tenant to be legally entitled to 
construct a facility for providing cellular telephone services; or, 
(2) 30 days following the date the tenant begins construction of 
the communications facilities for those phases for which Nextel 
Communications has already received building permits (e.g. 
for electrical wiring). The proposed lease is expected to 



Memo to Finance and Labor Committee 
September 20, 2000 Finance and Labor Committee 



Rights of Renewal: 



commence in the Fall of 2000, and would expire five years 
after the commencement date (in Fall of 2005). 

Under the terms proposed lease, the tenant would have three 
options to extend the lease for five years, for a total maximum 
lease term of 20 years. Prior to each 5-year option, the base 
rent would be adjusted to equal the fair market rent of the 
subject property. This adjustment would be determined by the 
Department of Real Estate (DRE), using a market survey 
approach for comparable space leased for cellular telephone 
transmitters. Attachment I, provided by DRE, explains how 
DRE sets its rental rates for such cellular telephone 
transmitters. 



Utilities and Janitorial 

Provided by Lessor: The lessee will pay for the costs of all utilities and janitorial 



Tenant 
Improvements: 



Description: 



Upon commencement of the subject lease, Nextel 
Communications will install at its own cost its cellular 
equipment on the roof of the San Francisco General Hospital 
Parking Garage. 

The proposed resolution would authorize a 5-year lease 
between the City and Nextel Communications for space on the 
roof of San Francisco General Hospital Parking Garage, 
located at 23 rd and Utah Streets (Assessor's Block 4219, Lot 1). 

Under the subject lease, Nextel Communications proposes to 
construct and maintain a cellular telephone transmitter, 
including six transmitter cabinets on the fifth level of General 
Hospital Parking Garage and six antennae on the roof of the 
elevator tower. 



Comments: 



1. According to Mr. Larry Jacobson of DRE, the proposed 
rental rate of $3,000 per month for the subject lease with 
Nextel Communications represents DRE's current rate for 
cellular communication site leases and is considered to be fair 
market value. According to Mr. Jacobson, the rental value of a 
cellular communication site is based on the service provided to 
cellular phone users and the amount of potential phone traffic 
at specific locations, not on the basis of square feet. 



Memo to Finance and Labor Committee 
September 20, 2000 Finance and Labor Committee 

2. Mr. Jacobson advises that DRE does not complete a 
competitive bidding process for awarding leases for cellular 
transmitter space. As stated in Attachment II, provided by 
DRE, Nextel Communications selected the subject site as part 
of the company's City cellular coverage plan. Nextel 
Communications then requested to lease the cellular 
transmitter space from the City, as is the regular procedure, 
according to Mr. Jacobson. 

3. According to Mr. Jacobson, the location of the subject lease 
on the General Hospital Parking Garage contains sufficient 
space for a second cellular phone company to place a 
transmitter and antenna, as is required by the Federal 
Communications Commission (FCC). 

4. According to Mr. Richard Lee of the Department of Public 
Health (DPH), Environmental Health Section, DPH reviews a 
Radiofrequency Radiation Ambient Report for all requests for 
cellular transmitter space on City property and privately- 
owned property in the City. Mr. Lee reports that DPH 
reviewed the report for the subject lease to ensure that the 
radio-frequency radiation levels of the proposed cellular 
transmitter would comply with standards set by the FCC and 
the America National Standards Institute (ANSI). 

5. The proposed resolution authorizes the Director of Property 
to "...enter into any amendments or modifications to the 
Lease... that the Director of Property determines, in 
consultation with the City Attorney, are in the best interest to 
the City, do not increase the rent or otherwise materially 
increase the obligations or liabilities of the City, are 
necessarily advisable to effectuate the purposes of the lease or 
this resolution, and are in compliance with all applicable laws, 
including the Charter." 



Recommendation: Approve the proposed resolution. 



\ 



City 'and County of San Francisco 




Attachment I 

Real Estate Division 
Administrative Services Department 



MEMORANDUM 




DATE: August 17, 2000 

TO : Emily Newman 

Budget Analyst Office 



FROM: Larry Jacobson 

Real Estate Division 



SUBJECT: Cell Phone Transmitter Rental Rates 



This memorandum is to inform you of the three fees currently applied to cell phone transmitter 
sites that are large enough for a second cell phone company to co-locate and put a second 
transmitter in operation. 

• 55,000.00 per month: Sites adjacent to US 101 Freeway, 1-80 and Bay Bridge approach 
as well as Doyle Drive and the Golden Gate Bridge, e.g., Hall of Justice, San Francisco 
General Hospital. Rent is based upon traffic counts of 92,000,000 vehicles per annum 
on US 101/1-30, and 44,000,000 vehicles per annum on the Golden Gate Bridge. 

• 53,000.00 per month: Site covering neighborhoods, e.g., Visitacion Valley, Excelsior, 
etc, which have large coverage area but low vehicle count on the streets, as well as 
major high volume streets, e.g., Oak, Fell, Gough, Franklin, Lombard, etc. Rent is 
based upon Oak-Fell, 25,000,000 vehicles per annum; Gough-Franklin, 22,000,000 
vehicles per annum; and Lombard, 13,000,000 vehicles per year. 

• 52,000-2,500 per month: Micro coverage for sites in geographically hard to reach areas 
such as Civic Center Plaza, Laguna Honda Boulevard at Dewey Boulevard intersection, 
three million vehicles per annum. 



If you have any questions please call me at 554-9363. 



I/lJ/cclIph tnmsmtr rcntl BudgiAnalys /wtc 



(415) 554-9350 
FAX: (415) 552-9215 



Office of the Director of Property 
25 Van Ness Avenue, Suite 400 



San Francisco, CA 94102 



1 T. 



City and County ot San i-rancisco 




Attachment II 

neai estate uivi^iuh 
Administrative Services Department 



MEMORANDUM 



DATE: 


September 1, 2000 


TO: 


Emilie Neumann 
Budget Analyst's Office 


FROM: 


Larry Jacobscn 

Senior Real Property Office 



SUBJECT: Siting Cellular Phone Transmitters; 

Reason ix is impractical to request bids 



Each cellular phone company establishes its own set of cells; each cell covers a finite 
geographic area. The area of the cell, generally round, is affected by both topography and 
the amount of telephone traffic within any geographic area. 

Cellular phone companies have different cell configurations. The cellular phone company 
determines where to place the transmitter and approaches the property owner. 

The City and County of San Francisco can often accommodate cell phone companies on 
City property - but not always. There may be problems such as finding space for the 
transmitter equipment, 24-hour access, proximity to neighboring apartment houses, etc. 
Since cellular phone companies have differing needs for siting cell phone transmitters, it is 
impractical to request bids for a specific site since generally only one company has an 
interest in a selected site. 

Finally, FCC requirements provide for co-location of cell phone equipment. The companies 
doing business in San Francisco have approached the City on a number of occasions seeking 
co-location; however, to date co-location has not occurred on City property. 



i/uacrs/LI/erllph tranimir siting Budgl Analyi /wto 



(415)554-9850 
FAX: (415) 552-9216 



Cffica of the Director of Property 
25 Van Ness Avenue, Suite 400 



San Francisco, CA 94' 

TQTftL P. 31 



i n0 



Memo to Finance and Labor Committee 
September 20, 2000 Finance Committee Meeting 



Item 12 - File 00-1533 

Department: 

Item: 



Amount: 
Source of Funds: 

Description: 



Mayor's Office of Community Development (MOCD) 

Hearing to request release of reserves in the amount of 
$43,581 to be used to update the City's 5 Year Continuum 
of Care Plan, increase the number of technical assistance 
hours available and add workshops for MOCD-funded 
nonprofit organizations in need of capacity building 
assistance. 

$43,581 

Funds reserved by the Board of Supervisors in the Fiscal 
Year 2000-2001 Community Development Block Grant 
(CDBG). 

In April of 2000, MOCD's proposed budget requested a FY 
2000-2001 CDBG Planning and Capacity Building 
allocation of $327,967, which was $43,581 or 
approximately 15 percent more than the FY 1999-2000 
CDBG allocation toward that program (see File No. 00- 
0488). The Board of Supervisors placed the requested 
additional $43,581 on reserve pending submission by 
MOCD of an expenditure plan and budget details for the 
additional Planning and Capacity Building funds. 

The proposed reserved FY 2000 - 2001 funds of $43,581 
would be used by MOCD to a) contribute $25,000 or 50 
percent of the cost of updating the City's 5 Year 
"Continuum of Care Plan" (see Comment No. 1), and b) 
provide funds to increase the Technical Assistance 
Program ($18,581), which would increase the number of 
technical assistance hours available to MOCD-funded 
nonprofit organizations in need of capacity building 
assistance. Additionally, as part of the Technical 
Assistance Program, new workshops would be provided to 
MOCD-funded non-profit organizations free of charge, 
and to other non-profit organizations City-wide. 

If the Board approves release of the subject requested 
funding of $25,000 that MOCD would use for updating 
the Continuum of Care 5-Year Plan, other departments 
would provide a match of an additional $25,010 (see 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 
September 20, 2000 Finance Committee Meeting 



Budget: 



Comment No. 2) for a total allocation to the Continuum of 
Care plan of $50,010. 

A summary budget for the requested $43,581 release of 
reserves is as follows: 



Continuum of Care Project (not including 1:1 
matching funds from other Departments) 
89 consulting hours at $95 per hour 
137 consulting hours at $65 per hour 
138.9 consulting hours at $55 per hour 
Total 



$8,455 
8,905 
7.640 

25,000 



Comments: 



Technical Assistance Program 

50 workshop vouchers at $115 each 5,750 

128.31 consulting hours at $100 per hour 12.831 

Total 18.581 

Grand Total $43,581 

The Attachment, provided by MOCD, provides additional 
budget details for the total project cost of $68,591, 
including $50,010 for the Continuum of Care Plan and 
$18,581 for the Technical Assistance Program. 

1. According to Ms. Kimberly Fergison of MOCD, 
Continuum of Care is a national program that was 
developed by the U.S. Department of Housing and Urban 
Development (HUD), and consists of the coordination of 
local services to homeless persons in cities across the 
United States. The first San Francisco Continuum of 
Care program was started in 1996, and was a 5-year plan. 
Ms. Fergison states that the current plan needs to be 
updated for another 5 years in order for San Francisco to 
remain competitive for Federal HUD grants for homeless 
programs. 

2. According to Ms. Fergison, $25,000 of the Continuum 
of Care 5-Year Plan Project would be funded from the 
subject MOCD CDBG reserved funds. An additional 
$25,010 in matching funds would be contributed to the 
Continuum of Care 5-Year Plan Project by other 
Departments from previously budgeted FY 2000 - 2001 
funds. Ms. Fergison states that the Department of Public 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 
September 20, 2000 Finance Committee Meeting 



Health and the Department of Human Services would 
each contribute $10,005, while the Department of 
Children, Youth, and their Families would contribute 
$5,000 to the subject project. Consequently, the total 
contribution to the subject project for the Continuum of 
Care program would be $50,010 including this requested 
$25,000 funding from CDBG funds. 

The Continuum of Care 5-Year Plan cost of $50,010 
($25,000 of which would be funded from the requested 
release of CDBG reserved funds, and $25,010 from 
previously budgeted department funds), along with the 
Technical Assistance Program total of $18,581 in CDBG 
funds, would therefor provide for a total Project cost of 
$68,591. 

3. According to Ms. Gloria Woo of MOCD, the Technical 
Assistance Program of $18,581 in CDBG funds would 
consist of three components: 1) workshop vouchers, which 
would allow CDBG-funded agencies to participate in any 
of the 12 planned workshops that would be conducted by 
Compass Point, a nonprofit agency (see Comment No. 5); 
2) organizational development consultation, which 
includes one-on-one consulting to CDBG-funded agencies 
on special projects; and 3) special forums specifically 
designated for CDBG-funded agencies on topics of special 
interest. 

4. Ms. Fergison states that Harder and Co., a for-profit 
contractor, was selected to update the Continuum of Care 
5-Year Plan Project at a cost of $50,010, through a 
Request for Proposal (RFP) process. According to Ms. 
Fergison, Harder and Co. was selected from six 
respondents because they offered the lowest rates, and 
had more experience with regard to homeless issues than 
the other five respondents. 

5. According to Ms. Fergison, Compass Point, the 
nonprofit agency selected to perform the subject work on 
the Technical Assistance Program, has a preexisting 
contract with MOCD, and has been selected through an 
annual RFP process for capacity building activities each 
year since 1995. Ms. Fergison states that Compass Point 
is typically the only respondent to the Department's 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 
September 20, 2000 Finance Committee Meeting 

annual RFP regarding capacity building because they 
have unique experience working with non-profits agencies 
in this area. 

Recommendation: Approve the proposed release of reserved funds. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Attachment 
Page 1 of 2 



Harder+Co Continuum of Care Plan Budget 

Mayor's Office on Homelessness 
Proposed Six Month Timeline: 8/1/00 - 2/1701 



| STAFF ASSIGNMENTS (in hours) 



TASKS/SCOPE OF WORK 



Michelle 
Magee 



Clare 
Nolan 



Lydia 
Ely 



1. Review Existing Continuum of Care 8 
Plan from 1996-2001 

2. Analyze 1996-2001 Continuum of 20 
Care Plan and develop recommendations 

3. Coordinate the input of nine 36 
subcommittees of the Local Board 

a. Interim community input 12 

4. Identify potential sources of 4 
information for updating analysis 

5. Along with Local Board and Mayor's 4 
Office, identify changes in resources 

6. Draft a document 38 

7. Organize feedback and a public 24 
review process 

8. Edit and finalize draft 32 



8 


8 


20 


20 


60 


80 


24 


24 


20 


10 



20 



53 
36 



32 



10 



60 
30 



32 



Total Hours 



178 



278 



274 



PROJECT BUDGET 



Michelle Magee, Project Director 
Clare Nolan, Team Member 
Lydia Ely, Consultant 





Rate 


Hours 


Total 


rector $ 


95 


178 


16,910 


: S 


55 


278 


15,290 


S 


65 


274 


17,810 


Total Labor 




$ 


50,010 


Total Budget 




S 


50,010 



RFQ#3 page 4 



Attachment 
Fage I or 2 



CompassPoint Technical Assistance Program 








for CDBG-funded Agencies 
















Component 




RifflO* 




1 . Workshop Vouchers 


SO voucfiers @ Si 15 each 


S5.750 




2. Organizational Development Consultation 


128.31 hours @ SlOQ/hr. 


S1Z531 












Total AdditionaJ Budget 




S1 8,581 













Memo to Finance and Labor Committee 
September 20, 2000 Finance Committee Meeting 



Item 13 - File 00-1534 

Department: 

Item: 



Amount: 
Source of Funds: 



Description: 



Mayor's Office of Community Development (MOCD) 

Hearing to request release of reserves in tbe amount of 
!j>500,000 to be used to construct the interior portion of the 
Training Center space at the Evans Campus of San 
Francisco City College. 

$500,000 

Funds reserved by the Board of Supervisors in the Fiscal 
Year 1998-1999 Community Development Block Grant 
(CDBG) budget. 

In February of 1998, MOCD budgeted a FY 1998-1999 
CDBG Work Force Development Pool allocation of 
$2,000,000. $1,909,331, or approximately 95 percent, of 
those funds were made available for individual Workforce 
Development projects 1 . The Board of Supervisors placed 
all of the $1,909,331 for such projects on reserve pending 
submission by MOCD of expenditure plans and budget 
details for specific Work Force Development projects. 

The requested release of reserved funds would release 
$500,000 of the previously reserved $1,909,331 in FY 
1998-1999 CDBG Work Force Development Center funds, 
which would be used by the San Francisco Community 
College District (SFCCD) to construct the interior portion 
of the Training Center space at the Evans Street Campus 
of SFCCD. 

The new Training Center, once completed, would allow 
City College to offer certified trade training and curricula 
to individuals seeking employment or advancement in the 
construction and maritime trades. The facility would also 
be used to provide employment support services for 
individuals enrolled in construction and maritime skills 
training at City College. 



1 The remaining $90,669, or approximately 5 percent, of these funds was expended to cover 
administration costs. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



107 



Memo to Finance and Labor Committee 
September 20, 2000 Finance Committee Meeting 



Budget: A summary budget for the requested $500,000 is as 

follows: 



Construction Items 




Demolition 


$4,000 


Doors and Frames 


26,500 


Observation Windows 


11,000 


Interior Walls 


107,130 


Acoustic Ceilings 


21,210 


Vinyl Composite Floor Tiles 


13,500 


Painting 


10,000 


Seal Concrete Floor 


8,070 


Signage 


2,500 


Mechanical Heating, Ventilating, and Air 




Conditioning System 


120,090 


Dust Collection System 


10,000 


Electric Power Infrastructure 


80,000 


Telecommunications Infrastructure 


5,000 


Blueprints, Reproduction and Permits 


6.000 


Total 


425,000 



Architectural and Engineering Services 75.000 

Grand Total $500,000 

Comments: 1. According to Mr. Jon Pon of MOCD, a construction 

contractor has not been selected. According to Mr. Pon, a 
contractor will be selected by SFCCD for the subject 
project through a competitive process, should the Board 
approve the proposed release of reserved funds. 

2. According to Mr. Pon, the estimate for the subject 
project was provided to MOCD by a licensed architect 
employed by SFCCD. 

3. Because a contractor has not been selected for the 
proposed project, the Budget Analyst recommends that 
only $81,000 be released from reserve ($75,000 for 
Architectural and Engineering Services and $6,000 for 
Blueprints and Permits) so that plans can be prepared to 
competitively bid the project. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

108 



Memo to Finance and Labor Committee 
September 20, 2000 Finance Committee Meeting 

Recommendation: Release $81,000 of the $500,000 requested and continue 

to reserve the balance of $419,000 pending selection of a 
contractor and submission of budget details to the Board 
of Supervisors. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

Item 14 -File 00-1523 



Department: 
Item: 



Services to be 
Performed: 

Description: 



Comments: 



Airport 

Resolution approving the Controller's certification that 
public parking management services for the San Francisco 
International Airport can continue to be practically 
performed by a private contractor at lower cost for the year 
commencing July 1, 2000 than if the work were performed 
by City and County employees. 

Public parking management services 

Charter Section 10.104 provides that the City may contract 
with private firms for services, if the Controller certifies, 
and the Board of Supervisors concurs, that such services 
can in fact be performed by private firms at a lower cost 
than similar work performed by City employees. 

The Controller has determined that contracting for public 
parking management services at the Airport for FY 2000- 
2001 would result in the estimated savings as follows: 



Citv-Operated Service Costs 

Parking & Taxicab Operations 
Security Control 
Janitorial Services 
Total 

Contractual Services Costs 

Parking & Taxicab Operations 
Security Control 
Janitorial Services 
Total 

Estimated Savings 



Low 



High 



$11,554,883 $13,434,209 
4,541,806 5,292,830 
2.331.935 2.709.581 

$18,428,624 $21,436,620 



$9,865,851 
2,497,592 
2.301.996 



$9,865,851 
2,497,592 
2.301.996 



$14,665,439 $14,665,439 
$3,763,185 $6,771,181 



1. Public parking management services for the Airport 
include management of parking and taxicab operations, 
security guard services and janitorial services, according to 
Mr. Fred Strong of the Airport. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



110 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

2. Public parking management services have been 
contracted out since 1971, the first year that these services 
were provided. 

3. The prior one-year contract, which commenced on July 

1, 1999 and expired on June 30, 2000, was with AMPCO 
System Parking Company. Mr. Strong states that AMPCO 
has provided public parking management services to the 
Airport for the last nine years. The Airport is exercising 
the fourth of four one-year options to renew this contract 
with AMPCO. 

4. The subject one-year contract with AMPCO began on 
July 1, 2000. Therefore, the proposed resolution should be 
amended to provide for retroactive authorization. 

5. The Contractual Services Costs used for the purpose of 
this analysis are AMPCO's projected FY 2000-2001 costs for 
public parking management services. 

6. According to Mr. Strong, AMPCO provided both public 
parking management services and employee parking 
management services until September 1, 1999. On 
September 1, 1999, ABC Parking Inc./THOR assumed 
responsibility for the provision of employee parking 
management services. Mr. Strong reports that a proposed 
resolution retroactively authorizing the contract with ABC 
Parking Inc./THOR for employee parking management 
services will be submitted for approval by the Board of 
Supervisors at the end of September of 2000. 

7. The Attachment to this report, provided by the 
Airport, is the Controller's supplemental questionnaire 
with the Department's responses. 

Recommendations: 1. Amend the proposed resolution to provide for retroactive 
authorization, in accordance with Comment No. 4 above. 

2. Approve the proposed resolution, as amended. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

111 



Attachment 



CHARTER 10.104.15 (PROPOSITION J) QUESTIONNAIRE 



Department: Airport Commission 

Contract Services: Public Automobile Parking 

Contract Period: July 1 . 2000 to June 30, 2001 



1. Who performed the activity/service prior to contracting out? 

This service has always been contracted out. it has never been operated by City personnel. 

2. How many City employees were laid off as a result of contracting out? 

None 

3. Explain the disposition of employees if they were not laid off. 
N/A 

4. What percentage of City employees' time is spent on services to be contracted out? 
N/A 

5. How long have the services been contracted out? Is this likely to be a one-time or an 
ongoing request for contracting out? 

Services have been contracted out since October 16. 1971, it is likely to remain contracted 
out. 

6. What was the first fiscal year for a Proposition J certification? Has it been certified for 
each subsequent year? 

It has been certified each year since 1980. 

Yes, it has been certified each year since Fiscal Year 1980/81. 



How will the services meet the goals of your MBE/WBE Action Plan? 
Although this contract was not awarded to a MBE/WBE firm in 1995, it must adhere to the 
City's non-discrimination ordinance contained in Chapters 12B & 12C of the City's 
Administrative Code. This contract contains MBE;WBE goals which include "best effort to 
meet a 30% goal. 

Does the proposed contract require that the contractor provide health insurance for its 
employees? Even if not required, are health benefits provided? 

The contractor provides health insurance for its employees through union agreements. 



9. 



Does the proposed contractor provide benefits to employees with spouses? If so, are 
the same benefits provided to employees with domestic partners? If not, how does the 
proposed contractor comply with the Domestic partners ordinance? 

AMPCO and parent ABMI are working on ajiatio4i-wjdeT3o?hestic Partners Program. This 
contract is unchanged and the requirement was njt indudecyih the contract. 



A 

Department Representative: 



%** \r 



Robed Rhoades, Deputy Airport Director - Business 
Telephone Number: (650) 821-4050 



1.0:.04.0:AMPCOPROPJCHARTERlOQuesnonniircOO-01 

112 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



Item 15 - File 00-1537 

Department: 

Item: 



Services to be 
Performed: 

Description: 



Juvenile Probation 

Resolution concurring with the Controller's certification 
that intake and shelter services for status offenders can 
continue to be practically performed by a private 
contractor at lower cost for the year commencing July 1, 
2000 than if work were performed by City and County 
employees. 

Shelter and intake services for status offenders 

The Juvenile Probation Department first entered into a 
contract with Huckleberry Youth Programs (formerly 
known as Youth Advocates, Inc.) in 1984 to provide a 
community-based central receiving facility for status 
offenders. Status offenders are youth who have run away 
from home, have a history of truancy, or are in other ways 
out of their parents' control, but who are not in the 
criminal justice system. Prior to the contract with 
Huckleberry Youth Programs to provide the community- 
based central receiving facility services, such status 
offenders were retained in Juvenile Hall. 

In 1989 the Juvenile Probation Department expanded the 
services provided under the contract with Huckleberry 
Youth Programs to include intake and shelter services for 
status offenders. Huckleberry Youth Programs currently 
provides a 24-hour short-stay shelter and needs 
assessment for youth, with the goal of reuniting youth 
with their family or providing appropriate longer-term 
placement. 

Charter Section 10.104 provides that the City may 
contract with private firms for services, if the Controller 
certifies, and the Board of Supervisors concurs, that such 
services can in fact be performed by private firms at a 
lower cost than similar work by City and County 
employees. 

The Controller has determined that contracting for the 
shelter and intake services for status youth offenders for 
FY 2000-2001 would result in estimated savings as follows: 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



113 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

Lowest Highest 

Salary Salary 

City-Operated Service Costs Step Step 

Salaries $ 732,808 $ 891,566 

Fringe benefits 205.668 230.454 

Total $ 938,476 $1,122,020 

Contractual Service Cost* 586.973 610.238 

Estimated Savings $ 351,503 $ 511,782 

*According to Mr. Joe Matranga of the Controller's Office, 
Contractual Service Costs include (a) the current contractor's 
cost of $539,557 and (b) 1.0 FTE 8444 Deputy Probation Officer 
in the Juvenile Probation Department, at the lowest salary step 
of $47,416, and highest salary step of $70,681, to monitor the 
contract. 

Comments: 1. Ms. Cheyenne Bell of the Juvenile Probation 

Department reports that the Department first entered into 
a contract with Huckleberry Youth Programs, Inc. in 1984 
to provide a central receiving facility for status offenders, 
and that the contract with Huckleberry was expanded in 
1989 to include shelter and intake services. Therefore, the 
central receiving facility was first certified under Charter 
Section 10.104 in 1984. The expanded shelter and intake 
services contract was first certified by the Controller as 
being less expensive than if the services were performed by 
City employees in 1989, and the shelter and intake services 
have been continuously provided under the outside contract 
since then. 

2. As noted above, the Contractual Service Cost used for 
the purpose of the analysis is based on: (a) the current 
contractor's cost of $539,557 to provide shelter and intake 
services, and (b) the salary and fringe benefits of 1.0 FTE 
8444 Deputy Probation Officer, ranging from $47,416 at the 
lowest salary step to $70,681 at the highest salary step. 

3. The subject contract with Huckleberry Youth Programs 
began on July 1, 2000. Therefore, the proposed resolution 
should be amended to provide for retroactive authorization. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

114 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

4. The Controller's supplemental questionnaire with the 
Juvenile Probation Department's responses is shown in the 
Attachment to this report. 

Recommendations: 1. Amend the proposed resolution to provide for 

retroactive authorization, in accordance with Comment 
No. 3 above. 

2. Approve the proposed resolution, as amended. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

115 



. • Attachment 

Page' 1 of 2 



CHARTER 10.104.15 (PROPOSITION J) QUESTIONNAIRE 
DEPARTMEVH Juvenile Probation Department 

CONTRACT SERVICES: Shatter and Intaka Services far Status Offenders 
CONTRACT PERIOD: July 1, 2000 through June 30. 2001 

1} VVflc performed the aciivity/aervfca prior to contracting out? 

Jw9tiSa HaH Csunsahrx 

3-S31S Assistant CcunseJcrs 7- B220 Counselors, Juvenile Hell 

*>43ff GmmIvJ 

2) How many Cfty employees wera bid df as a result cf ccntraca'ng cur? . 

None, Eleven (1 1) poeUhns were cut from the budget but no pejmanent xta/T vwg laid off. 

3) Explain the disposition cf amplcyess if 'hey were net laid off. 

Permanent employees moved to positions In ether puts of Juvenile Hall (crmerty fitted by the 
Departments as-needed cadre. 

•*) What percentage of City' employees' time is spent on services to be contracted cur? 



50 % cf 1- 8414 Supervising Probation Officer 



100% cf 2-B318 CcunsBlcrsll 



100% 0/4.3444 cecuty Prcfcatico Officer 100% cf 14-8320 CcunseJcrs 

S) How long have the services been contracted our? Is it lDcsiy to be a one-time or an ongoing 
request for contracting out? 

T7le contract with Wudtfsca/ry youth Programs, Inc. [formerly Youth Advocates, Inc.) for a central 
receiving factory was first entered Into ty the Juvenile Probation Department. February 1, 1384. 
The contact expanded Jo inchide shelter and Intake for status offenders en April 1. 1S33, Ciearty, 
this agreement is ongoing and the Department expects to continue lo contract curtooCfa/n fhese 
services. 

€) What was the first fiscal year for a Preposition J ea/t'ffcabcn? Has "rt been cartrfled for each 
subsequent year? 

77io J5*3f year for the central receiving facility contract was FY 13B3/34. The Srst year for the 
expanded contract was FY 1S3B/33. This contract has been renewed each subsequent year. 

7) Hew will the services meet the goals of your MBE/WES acocn plan? 

Huckleberry Youth Programs. Inc. is a non-profit agency therefore, dees not fan wShin the purview 
cfMEEAHBS goals. Additionally, extensive outreach was accomplished et the Raqvest for 
QuaMcations staging saelcng potential MEE/WEE providers. 

Does tha prepessd eorrtras require 'hstth* csntradcr provide heafii Inauranca tor fa anzlcytesf? Even if 
n=l required, are health beneSta trcMcedl 

There is no stipulation in the body afiha conned or'fAhin tha scops of serAcas racvoing Ihe 
contractor to provfdo health benefits. 



..JTJN-28-20G0 13:40 JUUENILE PROBATION 413*xrc»r r-.w 

' Attachment 

Page 2 of 2 



Tha eanfrsctort anatwaia HRC torn 128 '101 (Dedantien: Nondhomrkatlon in Ccntrzdsam ' 
Banana zttezathey offer heaSh banaSts to Wan- wnp/cyeaa. 

8) Does The proposed cantracter provide baisflls to •rnpinyees wBh tnnusra? If so, ara the aama benefit^ 
provided to employees wtth domestic partners? If not hew does ma proposed entracor amply with 1 
tha Domestic Partners ordinance? 

77>d csntradai'saflsweisiBfiRGfem 13B-101 (pedemtlcn: ftorrduoMnatien in Qontrads in 
Benefits) adas&r they a/far health hanaffts to their employee* viitfi spouses 

Additionally, tflay facials ftey offer jfcs same /rea/tfi baeeSts h tfja damesBa partners sf their 
employees. 

Department Representative: Cheyenne Sell . 
Telephone Number 753-7313, FAX 753-7713 



117 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



Item 16 • File 00-1455 

Department: 

Item: 



Amount: 
Source of Funds: 



Description: 



Department of Human Services (DHS) 

Hearing to consider the release of reserved funds for the 
Department of Human Services for Fiscal Year 2000- 
2001, in the amount of $636,000, to fund the Hotel Master 
Lease Program that will provide and operate a supportive 
hotel for formerly homeless individuals in San Francisco. 

$636,000 

FY 2000-2001 DHS budget. During the FY 2000-2001 
budget review, the Finance and Labor Committee 
recommended and the full Board of Supervisors approved 
reserving $700,000 in the DHS budget for an additional 
master-leased hotel for homeless clients. DHS is now 
requesting release of the full amount of $700,000, and not 
$636,000 as stated in the hearing notice. 

DHS implemented the Hotel Master Lease program in 
1999 to provide housing in residential hotels to formerly 
homeless clients. Currently, DHS has a contract with 
Tenderloin Housing Clinic (THC), a nonprofit 
organization which was selected through a Request for 
Proposal (RFP) process, to operate supportive housing 
programs for formerly homeless clients in residential 
hotels. In FY 1999-2000 THC entered into master lease 
agreements with three residential hotels (Seneca Hotel, 
Mission Hotel, and Jefferson Hotel) to provide supportive 
housing. In the FY 2000-2001 budget, DHS proposed two 
new master lease agreements in addition to the three 
master lease agreements noted above, for a total of five 
hotels with master lease agreements. DHS included 
$1,099,025 in the FY 2000-2001 budget for the two new 
master lease agreements: $399,025 for a master lease 
agreement with the Vincent Hotel at 459 Turk Street to 
provide 103 rooms for homeless clients and $700,000 for a 
master lease agreement for an undetermined hotel. The 
Board of Supervisors reserved $700,000, pending selection 
of a residential hotel. DHS is requesting release of 
$700,000, which includes $636,000 for a new master lease 
agreement with the Hartland Hotel and $64,000 to 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



118 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



increase the amount of the master lease agreement with 
the Vincent Hotel, as noted below. 

DHS is requesting release of $636,000 of the $700,000 in 
reserved funds for a contract with THC to operate a 
supportive housing program at the Hartiand Hotel at 909 
Geary Boulevard. In July of 2000, DHS issued an RFP for 
a contractor to operate a supportive housing program and 
to enter into a master lease agreement with a new hotel. 
The RFP specified that the successful bidder was required 
to have experience working with formerly homeless 
individuals in a supportive housing environment and to 
have an agreement from a residential hotel owner to enter 
into a long-term master lease. Only THC responded to 
the RFP. The Human Services Commission approved the 
proposed contract with THC on August 24, 2000. Under 
the proposed contract between DHS and THC, THC would 
enter into a 10-year master lease agreement with the 
Hartiand Hotel, 909 Geary Boulevard, to provide 137 
rooms for homeless clients. The hotel rooms were 
available September 1, 2000, and approximately 54 
former tenants of the Hartiand Hotel who were displaced 
when the hotel burned in February of 1999 began moving 
back into the hotel. As explained in the attached 
memorandum (Attachment I), Ms. Julie Brenman of DHS 
states that the master lease agreement for the 
management and operation of the supportive housing 
program at the Hartiand Hotel became effective on 
September 1, 2000, and therefore, the request for the 
release of the reserved funds is retroactive. 

DHS reports that other prospective tenants, who are 
participants in the PAES program 1 or who are currently 
sleeping in homeless shelter beds, have been identified. 
The former tenants of the Hartiand Hotel who were 
displaced due to the fire will pay the monthly room rental 
rate in effect for each tenant prior to the fire. Under the 
master lease agreement, the room rental rate for new 
tenants will be $450 per month, which is the same rate in 
effect for the master lease agreements with the Vincent, 
Seneca, and Mission Hotels. The monthly room rental 



1 The PAES (Personal Assisted Employment Services) program, which was implemented by DHS in 
October of 1998, is a voluntary program available to all General Assistance recipients who are 
employable but are temporarily unemployed. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

119 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



Budget: 



rate under the master lease agreement with the Jefferson 
Hotel is $400 per month. 

Additionally, DHS is requesting release of $64,000 of the 
$700,000 to partially fund an increase in the master lease 
agreement with the Vincent Hotel. According to Mr. 
Kayhan, the actual lease agreement with the Vincent 
Hotel is $471,958, which is $72,933 more than the 
budgeted amount of $399,025. Mr. Kayhan states that 
DHS included funds for approximately 10 to 11 months of 
operation of the supportive housing program at the 
Vincent Hotel. Mr. Kayhan reports that the hotel became 
available for occupancy on June 1, 2000, and that tenants 
began to move into the hotel in June of 2000. Therefore, 
Mr. Kayhan states that the Vincent Hotel will be occupied 
for the full 12 months of FY 2000-2001, rather than 10 to 
11 months, as originally anticipated. Mr. Kayhan states 
that additional funds in the amount of $8,933 ($72,933, 
which is the amount of the shortfall, less $64,000, which 
is the amount of available funds on reserve) are available 
in the FY 2000-2001 DHS budget. 

The proposed budget for the Vincent and Hartland Hotels 
supportive housing programs is as follows: 





Funds 


Funds 


Additional 


Total hotel 




appropriated 


reserved in 


funds 


operating 




and available 


FY 2000- 


available 


and 




in FY 2000- 


2001 budget 


in DHS 


supportive 




2001 budeet 


process 


budeet 


services costs 


Vincent Hotel 










Operating costs 1 


$399,025 


S 64,000 


S 8,933 


$471,958 


Hartland Hotel 










Operating costs 1 




517,633 






Supportive services 2 




118.367 




636.000 


Total reserved funds 




$700,000 




SI. 107,958 



1 Operating costs include salaries and benefits of hotel staff; 
hotel operating expenses, such as utilities building 
maintenance supplies, insurance, and elevator contract. 

2 The supportive housing program at the Hartland Hotel will 
incur costs for supportive services in addition to the costs for 
supportive services included in the FY 2000-2001 DHS budget 
for the supportive services for the other four hotels (Seneca, 
Mission, Jefferson and Vincent Hotels). 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



120 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



Comment: 



Attachment II, provided by DHS, contains details to 
support the summary budget noted above. 

According to Mr. Kayhan, the target population for the 
residential hotel master lease program are homeless 
participants in the PAES program, and low-income 
working adults, recipients of Supplemental Security 
Income Pending program (SSIP), Veterans 
Administration benefits, Supplemental Security Income 
(SSI) and Social Security funds, who are currently 
residing in emergency shelters. Under the contract with 
THC, DHS will refer new clients to THC for placement in 
the hotel. All clients will be eligible for supportive 
services provided by THC. The master lease agreements 
with the Vincent and Hartland Hotels provide for a 
monthly room rental rate of $450. Mr. Kayhan states 
that tenants will pay all or a portion of the monthly rent, 
depending on income, and DHS will provide rental 
subsidies up to $150 per month to eligible tenants. Mr. 
Kayhan reports that DHS implemented the rental subsidy 
program in 1998 to aid PAES program participants for 
whom homelessness was a barrier to employment. The 
rental subsidy program, which is operated by THC, 
provides a time-limited rental subsidy to homeless 
individuals who have developed an employment plan. 
PAES participants are eligible for the rental subsidy for 
12 months, with the possibility of extensions up to a 
maximum of 27 months. If PAES participants obtain an 
income of $815 per month or greater, they are no longer 
eligible for the subsidy. SSIP clients are eligible for the 
subsidy until they begin receiving SSI, and other working 
clients are eligible for the subsidy until they achieve an 
income of $601 monthly. 



Recommendation: 



Approve retroactively release of the requested funds in 
the amount of $700,000. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



121 



Attachment ■ I 




City and County of San Francisco Department of Human Services 

Will Lightbourne 
Executive Director 

Deputy Directors 

Bill Bettoncourt 

Jim Buick 

Sally Kipper 

MEMORANDUM 

September 13, 2000 

TO: Severin Campbell, Budget Analyst's Office 

FROM: Julie Brenman, Director of Planning and Budget 

RE: Retroactive Approval for Release of Reserve 

DHS is requesting the release of $700,000 in reserved funds for the master lease hotel program. 
We had originally tried to calendar this item for the August 23, 2000 meeting of the Finance and 
Labor Committee. Unfortunately, the Committee's calendar was very full and we were told that 
your office would not be able to provide an analysis of the item. As you know, the Board of 
Supervisors then cancelled all of their meetings for the next three weeks. The September 20, 
2000 meeting was the first meeting of the Finance and Labor Committee after the August 23 rd 
meeting. 

While our request was made with enough notice to calendar the item on August 23 rd , it was not 
made with far enough in advance of the committee meeting to provide your office with adequate 
time to analyze the request. We were not able to make our request earlier because the contractor 
was not selected until mid-August and funds were placed on reserve pending contractor 
selection. 

At the time we learned that the Committee would not be able to consider the release of reserve 
until September 20 th , we faced two options: (1) Delay the start of the program past the planned 
start date of September 1, 2000, which would leave homeless persons without housing, or (2) 
Start the program prior to formal Committee approval. Given these two options, our Executive 
Director, Will Lightbourne, met with Supervisor Yee, the Chair of the Committee and a 
representative from Supervisor Ammiano's office, as Supervisor Ammiano had originally 
requested the funds be placed on reserve pending contractor selection. At both meetings, he 
explained that the Board's vacation schedule created a situation where it was necessary for us to 
begin the program on September 1 st and seek retroactive Committee approval at the September 
20* hearing. 

The new masterlease program for the Hartland hotel did in fact start on September 1, 2000. 
While no funds have been expended to date as we have not received our first invoice, we have 
committed the funds to the contractor. 



If you have any questions, please contact me at 557-5641. 



(415)557-5000 P.O. Box 7988 San Francisco, California 94120 

122 



'/■'* 



Attachment 
Page 2 of 2 



II 



Appendix B, Page 
|Document Date: 4/21/00 

DEPARTMENT OF HUMAN SERVICES CONTRACT BUDGET SUMMARY 

BY PROGRAM 


Contractor's Name 
Tenderloin Housing Clinic, Inc. 


Contract Term 
7/1/00 to 6/30/03 


(Check One) . New Renewal Modification |"7| 
If modification, Effective Date of Mod. No. of Mod. 


Program 


Hartland 


Budget Reference Page No.(s) 


Supportive Svcs 


Program Term: 


Mod 8/2000 


Expenditures 

Salaries & Benefits 


$65,067 


Operating Expense 


$50,900 


Capital Expenditure 


$2,400 


Subtotal 


$118,367 


Indirect Cost 




Indirect Percentage (%) of direct cost (Line 
16) 




Total Expenditures 


$118367 


DHS Revenues 

General Fund 


$118,367 








































































TOTAL DHS REVENUES 


$118,367 


Other Revenues 




























































Full Time Equivalent (FTE) 


2.1 


Prepared by: Kerry Abbott 


1 1 1 
Telephone No.: (415)771-2427 Date: 1/4/00 


DHS-CO Review Signature: 






DHS#1 






3/18/99 



123 



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124 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



Item 17 - File 00-1437 

Department: 

Item: 



Description: 



Department of Administrative Services 

Resolution authorizing the Director of the Department of 
Administrative Services to enter into an operating and 
licensing agreement with Pacific Bell Telephone 
Company, a Northern California Company, for the 
development and operation of the San Francisco Affinity 
Phone Card program, and implementation thereunder. 

Under the Affinity Phone Card program, which was 
approved by the Board of Supervisors in 1995, official City 
prepaid telephone cards bearing the City Seal are sold 
through vending machines and retail outlets located 
throughout the City and at the Airport. The City 
contracted with a private vendor, Winston Taylor, Inc. 
(now MVX Communications) to operate the program in 
1995. Under the operating and licensing agreement 
between the City and MVX Communications, MVX 
Communications paid to the City a licensing fee, based on 
a rate schedule of 13.5 percent to 15 percent of revenue 
generated by the sales of prepaid telephone calling cards. 
According to Ms. Kofo Domingo of the Department of 
A dmini strative Services (DAS), the City received 
approximately $140,000 annually from the Affini ty Phone 
Card program, of which approximately 80 percent was 
generated by prepaid telephone card sales at the Airport. 

The original three-year licensing agreement with MVX 
Communications was extended for one additional year 
until December of 1999. When the one-year extension 
expired in December of 1999, the Airport withdrew from 
the citywide Affinity Phone Card program, and entered 
into an agreement with Pacific Bell, which includes 
prepaid calling cards as part of the Airport's Turn-Key 
Public Communications Concession Agreement (File 99- 
1868). Ms. Domingo states that MVX Communications 
did not believe that the Affinity Phone Card program 
would generate sufficient revenues if the Airport was not 
included, and did not renew the operating and licensing 
agreement with the City for an additional year after the 
agreement expired in December of 1999. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

125 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



Term of Agreement: 



The Attachment, provided by Ms. Domingo, states that 
DAS determined that the City needed to join with the 
Airport to generate sufficient interest from vendors to 
operate the prepaid telephone card program. Therefore, 
rather than issuing a separate Request for Proposal (RFP) 
to select a new vendor for the Affinity Phone Card 
program, DAS decided to enter into an operating and 
licensing agreement for the Affinity Phone Card program 
with whichever vendor was selected by the Airport 
pursuant to Airport's RFP for a vendor to provide prepaid 
telephone calling cards at the Airport as part of the 
bundle of services included in the Turn-Key Public 
Communications Concession Agreement. According to Ms. 
Domingo, the Airport's RFP included the City's prepaid 
telephone calling card program. The proposed operating 
and licensing agreement with Pacific Bell, which is the 
subject of this resolution, would be separate from the 
agreement with the Airport. 

The proposed resolution would approve a new three-year 
operating and licensing agreement between the City and 
Pacific Bell for the operation of the Affinity Phone Card 
program. 

Three years, with the option to extend the Agreement for 
up to two additional one-year terms. Under the proposed 
operating and licensing agreement, if the Turn-Key Public 
Communications Concession Agreement between Pacific 
Bell and the Airport is terminated, the City and Pacific 
Bell shall have the option to terminate the proposed 
agreement. 



Revenue to the 
City: 



Pacific Bell would pay to the City General Fund an 
amount equal to the greater of the Minimum Annual 
Guarantee (MAG) or 20 percent of the gross revenues 
from the sale of the official phone cards as follows: 

First year MAG equals $150,000 
Second year MAG equals $200,000 
Third year MAG equals $250,000 

The MAG amounts noted above, which are payable by 
Pacific Bell to the City, are in addition to any amount due 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



126 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 

to tbe Airport under the separate Turn- Key 
Communications Concession Agreement 1 . 

Tbe City would have the right to terminate the proposed 
operating and licensing agreement if Pacific Bell does not 
pay the MAG amount noted above. Additionally, under 
the licensing and operating agreement the City would be 
able to seek legal remedy if Pacific Bell defaults on the 
MAG payment. 

Comments: 1. Under the proposed licensing and operating agreement, 

Pacific Bell would design, manufacture, and sell the 
prepaid calling cards at various locations throughout the 
City. The design of the phone cards and the locations at 
which they are sold are subject to City approval, through 
DAS. 

2. The price of the phone cards would be mutually agreed 
upon by Pacific Bell and the City. According to Ms. 
Domingo, the phone cards currently sold by Pacific Bell 
under the Airport agreement are in $5, $10, and $20 
denominations. 

3. Under the operating and licensing agreement, Pacific 
Bell would operate the Affinity Phone Card program, and 
Pacific Bell and AT&T would provide the actual phone 
service. Any change in the phone service provider would 
be subject to City approval, through DAS. 

4. Under the proposed agreement, Pacific Bell would work 
with the City and the San Francisco Convention and 
Visitors Bureau on developing promotional and marketing 
strategies for the sale of the prepaid telephone calling 
cards. Pacific Bell would present to DAS a written 
marketing and business plan for the sale of the phone 
cards, which would include a marketing timetable, sales 
projections, channels and methods of distribution, the 
nature and amount of advertising and advertising 
expenditures, projected operating expenses, and possible 



1 The Airport receives annual lease revenue from the Turn-Key Public Communications Concession 
Agreement of $.0921 per passenger for total passengers, which is approximately $3.7 million 
annually. According to Ms. Patty Maitland of the Airport, the prepaid calling card program is part of 
an integrated package, and the revenues from that program can not be separated from the total 
revenues. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

127 



Memo to Finance and Labor Committee 

September 20, 2000 Finance and Labor Committee Meeting 



plans for the expansion of the Affinity Phone Card 
program. Pacific Bell would meet with representatives 
from the City and the Convention and Visitors Bureau on 
a quarterly basis to report the status of its promotional 
and marketing programs. Ms. Domingo states that the 
costs of the marketing and promotional program would be 
borne by Pacific Bell. 



Recommendation: 



5. According to Mr. Brian Baker of the Convention and 
Visitors Bureau, the Bureau would enter into a separate 
agreement with Pacific Bell for a prepaid telephone 
calling card program. Mr. Baker states that any revenue 
generated from the sale of the prepaid telephone calling 
cards through the Convention and Visitors Bureau would 
go to the Bureau. 

Approve the proposed resolution. 



arvey M. Rose 




Supervisor Yee 
Supervisor Bierman 
President Ammiano 
Clerk of the Board 
Controller 
Steve Kawa 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



128 



— 09:52 ccsf rdmin. seruices Attachment 



££!£?i 




DEPARTMENT OF 

ADMINISTRATIVE SERVICES 



WILLIE L. BROWN, JR. 
Mayo ft 

RYAN L. BROOKS 

DlJtlCTOft 



September 12, 2000 



MEMORANDUM 

TO: Severin Campbell 

Budget Analyst 

FROM: Kofo Domingo < §/J%h*»' J tf 

Special AssistanrTfrqject Manager 

RE: San Francisco Affinity Phone Card Program 

Per your request, here is the explanation for merging the San Francisco Affinity Phone 
Card Program with the San Francisco Airport's Telecommunication Package. 

In November 1998, we received a letter from the San Francisco Affinity Program 
contractor, MVX Communications, informing us that the San Francisco Airport staff had 
notified them that the Airport was considering pulling out of the Affini ty phone card 
program, at the end of the existing contract. The Airport initiated a Request for Proposal 
for a full telecommunication package that would include phonecards at the Airport. 
Given this information, MVX made a business decision that unless the San Francisco 
Affinity phonecard program included the Airport, they would not be interested in 
continuing with the project. 

The Department of Administrative Services performed a business and financial analysis, 
and concluded that unless the City's program was affiliated with the San Francisco 
Airport's telecommunication package, we would not be able to maintain the same level of 
interest in the phonecard program. After discussions, Department of Administrative 
Services and the Airport came to an agreement to tie both programs together through one 
RFP process. This meant that the winning bidder for the Airport's RFP would also be 
responsible for running the San Francisco Affinity Phone card program. They would sign 
separate agreements with the Department of Administrative Services and San Francisco 
Airport, and run each program independent of the other. 

I hope this helps clarify the link between the Department of Administrative Services and 
the Airport with the San Francisco Affinity Phone Card Program. 



Cm Hall, Room 362, 1 Dr. Carlton B. Gcoolett Place, San Francisco, CA 94102-4683 
Telephone (415) 554-6171; Fax (415) 554-6177 



TOTAL P. 02 



129 




City and County of San Francisco 

JVieeting Minutes 

Finance and Labor Committee 

Members: Supervisors Leland Yee, Sue Bierman, Tom Ammiano 
Clerk: Mary Red 



[All Committees] 
Ma Sa e r 0CUmemSeC,i0n 



] 2l\0 



Wednesday, September 27, 2000 



10:00 AM 
Regular Meeting 



City Hall, Room 263 



Members Present: Leland Y. Yee, Tom Ammiano. 



Members Absent: Sue Bierman. 



DOCUMENTS DEPT 
OCT - 2 2GC3 



Meeting Convened 






The meeting convened at 10: JO a.m. 



SAN FRANCISCO 
PUBLIC LIBRARY 

001207 [Enforcement of Public Works Labor Standards] 
Supervisor Brown 

Ordinance amending Chapter 6 of the San Francisco Aclministrative Code by amending Section 6.22(E) to 
strengthen enforcement of the City's prevailing wage requirements and other requirements imposed on public 
works contractors by the Charter and Chapter 6 of the San Francisco Administrative Code, and to increase the 
penalties for violating prevailing wage requirements, and by adding a new Section 6.24 to establish an office 
within the Office of the City Administrator to enforce prevailing wage and other city public works 
requirements and to provide for a funding mechanism for that enforcement. 
6/16/00, ASSIGNED UNDER 30 DAY RULE to Finance and Labor Committee, expires on 7/26/2000. 
Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Supervisor Brown; Supervisor Yee; Ryan 
Brooks, Director, Administrative Services; Supervisor Ammiano; Erin McGrath, Mayor's Budget Office; Peter 
Nardoza, Deputy Director, Airport; Dan Smith, Building Trades Council; Carol Garrity, National Association 
of Women in Business; David Novogrodski, Local 21; Donna Levitt, Carpenter; Daniel Prince, President, 
Ironworkers Local 377; Walter Johnson, S. F. Labor Council; Jim Breahand, Bricklayers Local 3; Patrick 
Mulligan, Carpenters, Local 22; Ed Tong, Asian, Inc.; Kevin Chase, Painters Local J 6; Douglas Yamamoto, 
Glazers; Stanley Warren; S. F. Building Trades Council; Manny Flores; Kevin Dayton, Golden Gate Building 
Contractors; Albert Seto, AACA; Hansen Lee, Asian Contractors Association. 

Amended on page 1, line 8; page 14, lines 4 and J 2 to change references to "Office of the City Administrator" 
and "City Administrator" to "Department of Administrative Services" and "Director of the Department of 
Administrative Services" 
AMENDED. 

Ordinance amending Chapter 6 of the San Francisco Administrative Code by amending Section 6.22(E) to 
strengthen enforcement of the City's prevailing wage requirements and other requirements imposed on public 
works contractors by the Charter and Chapter 6 of the San Francisco Administrative Code, and to increase the 
penalties for violating prevailing wage requirements, and by adding a new Section 6.24 to establish an office 
within the Department of Administrative Services to enforce prevailing wage and other city public works 
requirements and to provide for a funding mechanism for that enforcement. 
RECOMMENDED AS AMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



City and County of San Francisco 



Printed at 3:10 PM on 9,78/00 



Finance and Labor Committee 



Meeting Minutes 



September 27, 2000 



001608 |Reserved Funds, Fire Department] 

Hearing to consider release of reserved funds, Fire Department (Fiscal Year 2000-2001 Budget), in the amount 
of $1,414,943 for overtime costs. (Fire Department) 

9/12/00, RECEIVED AND ASSIGNED to Finance and Labor Committee Department requests this item be scheduled for the September 
27, 2000 meeting. 

Heard in Committee. Speakers .Harvey Rose, Budget Analyst; Acting Chief Tobacco, Fire Department; 
Supervisor Yee; Ed Harrington, Controller. 
Continued to October 11. 2000. 
CONTINUED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



000635 [Public Utilities Revenue Transfers] 
Supervisors Vee, Bierman 

Ordinance amending Article 7 of Part I of the San Francisco Administrative Code by adding Section 2A.135, 
providing for the appropriation to the Public Utilities Commission of a portion of surplus Hctch Hetchy 
revenues transferred to the General Fund, and providing for periodic increases in the amounts to be returned to 
the Commission. 

(Fiscal impact; Adds Section 2A.135.) 

4/10/00, ASSIGNED UNDER 30 DAY RULE to Finance and Labor Committee, expires on 5/10/2000. 

9/20/00, CONTINUED. Continued to September 27, 2000. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Supervisor Yee; John Mullane, General 

Manager, Public Utilities Commission; Erin McGrath, Mayor's Budget Office; Emeric Kalman; Joan 

Girardot, Coalition for S. F. Neighborhoods. 

Amended on line 15 by replacing "construction, rehabilitation " with "maintenance"; on line 18 by replacing 

"2000-2001" with "2001-2002" and on line 22 by replacing "2009-2010" with "2010-2011". 

Supervisor Ammiano added as cosponsor. 

AMENDED. 

RECOMMENDED AS AMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



001596 [Establishing a special account known as Criminal Enterprise Investigations Restitution/Forfeiture 
Account for the Police Department] 

Ordinance Chapter 10 of the San Francisco Administrative Code by adding Section 10.1 17-124 establishing a 

special account for the receipt and expenditure of funds and property received in restitution and forfeitures in 

various criminal enterprises investigation cases. (Police Department) 

9/1/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Captain John Goldenberg, Police Department; Supervisor Yee; Ed 

Harrington, Controller. 

CONTINUED TO CALL OF THE CHAIR by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



City and County of San Francisco 



Printed at 3:10 P\f on 9/28/M 



Finance and Labor Committee Meeting Minutes September 27, 2000 



001556 [Outreach Advertising Services] 
Supervisors Yee, Bierman 

Resolution designating El Latino newspaper to provide outreach advertising services to the City and County of 
San Francisco for the Hispanic community; and designating Asian Week and International Daily News to 
provide outreach advertising services to the City and County of San Francisco; and authorizing the Purchasing 
Department to execute contracts with only those outreach newspapers that fully comply with all City 
contracting requirements, including equal benefits requirements, and in accordance with the highest scores and 
ranking resulting from the evaluation of bids received for outreach advertising; and further urging the San 
Francisco Redevelopment Agency and the San Francisco Housing Authority to cooperate with the Clerk of the 
Board and the City Purchaser to use the outreach newspapers; and further recommending the Clerk of the 
Board and the City Purchaser to jointly oversee outreach newspapers contract to ensure compliance regarding 
advertising, publication and translations; and further authorizing the Clerk of the Board and the Purchasing 
Department to explore and recommend to the Board additional outreach newspapers for communities of 
Russian, Southeast Asian, Korean and Filipino populations. 
8/28/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Michael Ward, Purchasing Department; Supervisor Yee. 
RECOMMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



City and County of San Francisco 3 Printed at 3:10 PM on 9/2&/00 



Finance and Labor Committee Meeting Minutes September 27, 2000 



001265 [CEQA Findings - Emporium Site Development) 
Supervisor Yaki 

Resolution affirming certification of the Yerba Bucna Redevelopment Project Area Expansion/Emporium Site 
Development Final Supplemental Environmental Impact Report by the Planning and Agency Commissions 
and adopting environmental findings (and a statement of overriding considerations) pursuant to the California 
Environmental Quality Act and State Guidelines in connection with adoption of the Yerba Buena 
Redevelopment Project Area Expansion/Emporium Site Development Project and various other actions 
necessary to implement the project. 

(Final EIR Certification Date: January 13, 2000; companion measure to Files 992234, 992235, 001265, 
001256, 001257, 001258, 001259, 001266, 001267, 001434.) 

Supervisor Yee dissenting in committee. 

Supervisor Becerril excused from voting in Board. 

7/10/00. ASSIGNED UNDER 30 DAY RULE lo Transportation and Land Use Committee, expires on 8/9/2000. 

8/22/00, RECOMMENDED Heard in committee. Speakers: Emilio Cruz, Director of Economic Development, Bill Carney, 

Redevelopment Agency, Kevin Warner, Senior Development Specialist, Redevelopment Agency, David Jones, Project DevelopCT, Forest 

City; Jim Firth, UFCW Local 101; Walter Johnson. San Francisco Labor Council, H Brown; Jim Chappell, SPUR, Anita Hill, Yerba 

Buena Alliance; Doug Comstock, Coalition for San Francisco, Jennifer Clary, San Francisco Tomorrow, Michael Levin, Mary Arm 

Miller, San Francisco Tomorrow, Myles Stephens, San Francisco Black Chamber of Commerce, Gary Jenkins, Charles Range, Alan 

Gibson, Budget Analyst Office 

Revised versions of Attachment A and Exhibit 2 were received and placed in the file 

8/22/00, REFERRED to Finance and Labor Committee. 

8/23/00, CONTrNUED TO CALL OF THE CHAIR Heard in Committee Speakers: Julie Brant, Mayor's Office of Economic 

Development; Lloyd Schaegel, Arthur Michel, Market Street Railway, Jim Firth, Local 101 , Walter Johnson, S. F Labor Council, 

Howard Wallace, Local 250; Supervisor Yee, Supervisor Ammiano, Supervisor Bierman 

8/28/00, CONTINUED. Supervisor Yaki requested this matter be continued to September 1 8, 2000. 

9/18/00, CONTINUED. Supervisor Yaki moved to continue consideration to September 25, 2000 

9/20/00, CONTINUED. Continued to September 27, 2000. 

9/25/00, ADOPTED Supervisor Newsom stated that upon further discussion with the City Attorney's office, he can now vote on all 

matters relating to the Emporium site project. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Supervisor Yee; Emilio Cruz, Director, 
Mayor's Office of Economic Development; Supervisor Ammiano; Bill Carney, Redevelopment Agency; Charles 
Chase, Executive Director, S. F. Architectural Heritage; Rachael Reyes Wenger, United Filipino Organizing 
Network (UFON); Gee Gee Piatt; Mary Anne Miller, S. F. Tomorrow; Anita Hill, Yerba Buena Alliance; 
Teresa Vergel, UFON; Joyce Robberson, Gabriel & Roche; Bernadette Sy, Filipino Cultural Center, Ly 
Nguyen, SOYAC; Luz DeLeon, Filipino American Art Exposition; John Elberling, Yerba Buena Center - 
Seniors; Garrett Jenkins, North of Market Planning Coalition; Charles Range, So. Market Health Center; 
Debbie Larkin. 
TABLED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



City and County of San Francisco 4 Printed at 3:10 PSi on 9/2&V0 



Finance and Labor Committee 



Meeting Minutes 



September 27, 2000 



001267 [Tax Increment Allocation/Financing Agreement - Emporium Site] 
Supervisor Yaki 

Resolution approving and authorizing a Tax Increment Allocation Pledge Agreement between the City and 
County of San Francisco ("City") and the Redevelopment Agency of the City and County of San Francisco 
("Agency"), under which the City agrees to a pledge by the Agency of a portion of the available non-housing 
tax increment generated by the redevelopment of the project site (specifically including Assessor's Block 3705, 
Lots 9, 10, 12, 13, 14, 15, 17, 18, 33, 38, and 43) in favor of Emporium Development, L.L.C. ("Developer"), a 
subsidiary of Forest City Enterprises, in furtherance of the implementation of the Redevelopment Plan 
amendment for the addition of the Emporium Site Area to the Yerba Buena Center Project Area; approving 
and authorizing a financing agreement and covenant to operate ("Financing Agreement") in connection with 
the Development of the Emporium Site Area; approving an allocation of tax increment for affordable housing 
purposes in excess of the minimum amount required under Redevelopment Law; making elections with respect 
to the allocation of tax increment; adopting findings pursuant to the California Environmental Quality Act; and 
adopting findings that the agreement is consistent with the city's General Plan and Eight Priority Policies of 
city Planning Code Section 101.1. 

(Fiscal impact.) 

7/10/00, ASSIGNED UNDER 30 DAY RULE to Transportation and Land Use Committee, expires on 8/9/2000. 

8/1 1/00, TRANSFERRED to Finance and Labor Committee. In conjunction with this matter, File 001265, CEQA findings, will be 

considered by the Finance and Labor Committee on August 23, 2000. 

8/23/00, CONTINUED TO CALL OF THE CHAIR Heard in Committee. Speakers: Julie Brant, Mayor's Office of Economic 

Development; Lloyd Schaegel, Arthur Michel, Market Street Railway; Jim Firth, Local 101 ; Walter Johnson, S. F. Labor Council; 

Howard Wallace, Local 250; Supervisor Yee, Supervisor Ammiano; Supervisor Bierman. 

9/20/00, CONTINUED. Continued to September 27, 2000. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Supervisor Yee; Emilio Cruz, Director, 
Mayor's Office of Economic Development; Supervisor Ammiano; Bill Carney, Redevelopment Agency; Charles 
Chase, Executive Director, S. F. Architectural Heritage; Rachael Reyes Wenger, United Filipino Organizing 
Network (UFON); Gee Gee Piatt; Mary Anne Miller, S. F. Tomorrow; Anita Hill, Yerba Buena Alliance; 
Teresa Vergel, UFON; Joyce Robberson, Gabriel & Roche; Bernadette Sy, Filipino Cultural Center; Ly 
Nguyen, SOYAC; Luz DeLeon, Filipino American Art Exposition; John Elberling, Yerba Buena Center - 
Seniors; Garrett Jenkins, North of Market Planning Coalition; Charles Range, So. Market Health Center; 
Debbie Larkin. 
REFERRED WITHOUT RECOMMENDATION by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



001581 [Lease of PUC property to Mid Peninsula High School in Menlo Park to be used as a parking lot/sports 
playing field for an adjacent high school] 

Resolution authorizing a 20-year lease of Public Utilities Commission land between the City and County of 
San Francisco and Mid Peninsula High School, in San Mateo County. (Public Utilities Commission) 
8/30/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Gaiy Dow, Public Utilities Commission. 
RECOMMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



City and County of San Francisco 



Printed at 3:10 PM on 9/28.'00 



Finance and Labor Committee 



Meeting Minutes 



September 27, 2000 



001590 |Airport Lease for Federal Aviation Administration (FAA) to provide updated equipment at a new 
location, essential to the safety of aircraft movements at the Airport) 

Resolution approving a lease agreement for placement and operations of an Approach Lighting System 

Sequence Flasher II (ALSF-2) between the United States of America and the City and County of San 

Francisco, acting by and through its Airports Commission. (Airport Commission) 

9/1 1/00, RECEIVED AND ASSIGNED to Finance and Labor Committee 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Peter Nardoza, Airport. 

Amended on lines 3 and 22 to provide retroactivity; and on lines 3 and 23 to replace "placement" with 

.installation of improvements ". 

AMENDED. 

Resolution approving retroactively, a lease agreement for installation of improvements and operations of an 

Approach Lighting System Sequence Flasher II (ALSF-2) between the United States of America and the City 

and County of San Francisco, acting by and through its Airports Commission. (Airport Commission) 

RECOMMENDED AS AMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



001602 [Airport Lease for Federal Aviation Administration (FAA) to install and maintain a new equipment that 
will allow for simultaneous landings during inclement weather] 

Resolution approving a lease agreement for the installation and operation of a SOLA Localizer, a navigational 
aid instrument on Runway 28R between the United States of America and the City and County of San 
Francisco, acting by and through its Airport Commission. (Airport Commission) 
9/1 1/00, RECEIVED AND ASSIGNED to Finance and Labor Committee 

Heard in Committee. Speakers: Harvey Rose. Budget Analyst. Peter Nardoza, Airport. 
Amended to provide retroactivity 
AMENDED. 

Resolution approving retroactively, a lease agreement for the installation and operation of a SOLA Localizer, a 
navigational aid instrument on Runway 28R between the United States of America and the City and County of 
San Francisco, acting by and through its Airport Commission. (Airport Commission) 
RECOMMENDED AS AMENDED by the following >ote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



001603 [Airport Curbside Management Program] 

Resolution authorizing the Airport Commission ("Commission") to approve the continuation of a contract with 

ShuttlePort/DAJA SFO Joint Venture to operate the Airport Curbside Management Program for up to four 

additional one year options commencing November 15, 2000. (Airport Commission) 

9/1 1/00, RECEIVED AND ASSIGNED to Finance and Labor Comrr.:r:cc 

Heard in Committee. Speakers: Barry Taranto, United Taxicab Workers. 

CONTINUED TO CALL OF THE CHAIR by the following >ote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



City and County of San Francisco 



Printed at 3:10 PM on 9 7S.V0 



Finance and Labor Committee 



Meeting Minutes 



September 27, 2000 



001604 [Contracting out Facility Security Services] 

Resolution concurring with the Controller's certification that facility security services for the Municipal 

Transportation Agency can be practically performed by a private contractor at a lower cost than by City and 

County employees. (Public Transportation Commission) 

9/1 1/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speaker: Harvey Rose, Budget Analyst. 

Amended to provide retroactivity. 

AMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 

Resolution concurring retroactively, with the Controller's certification that facility security sendees for the 
Municipal Transportation Agency can be practically performed by a private contractor at a lower cost than by 
City and County employees. (Public Transportation Commission) 
RECOMMENDED AS AMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



001650 [S.F. Housing Authority] 
Supervisor Ammiano 

Hearing to examine the San Francisco Housing Authority's conformity to federal Quality and Housing Work 
Responsibility Act enacted in 1998. 

9/18/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. Sponsor requests this item be scheduled for consideration at the 
September 27, 2000 meeting. 

Heard in Committee. Speakers: Supervisor Ammiano; Renee Saucedo, Directort of the Day Laborers; Miguel 
Carrera, Housing Not Borders; Vivian Martinez, Homeless Pre-Natal Program; Luz; JoAnne Greer. 
CONTINUED TO CALL OF THE CHAER by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



ADJOURNMENT 






The meetung adjourned at 2:00 p.m. 

(Not to be considered at this meeting) 



City and County of San Francisco 



Printed at 3:11 PM on 92S.00 



f 

'3 



[Budget Analyst Report] 

Susan Horn 

Main Library-Govt. Doc. Section 



CITY AND COUNTY 




OF SAN FRANCISCO 



BOARD OF SUPERVISORS 

BUDGET ANALYST 

1390 Market Street, Suite 1025, San Francisco, CA 94102 (415) 554-7642 
FAX (415) 252-0461 









September 21, 2000 

TO: , Finance and Labor Committee 

FROM: ^Budget Analyst 

SUBJECT: September 27, 2000 Finance and Labor Committee Meeting 

Item 1 - File 00-1207 

Department: Department of Administrative Services (DAS) 

Item: Ordinance amending Chapter 6 of the San Francisco 

Administrative Code by amending Section 6.22 (e) to 
strengthen enforcement of the City's prevailing wage 
requirements and other requirements imposed on public 
works contractors by the Charter and Chapter 6 of the 
San Francisco Administrative Code, and to increase the 
penalties for violating prevailing wage requirements, and 
by adding a new section 6.24 to establish an office within 
the Department of Administrative Services to enforce 
prevailing wage and other City public works requirements 
and to provide for a funding mechanism for that 
enforcement. 

Currently, private firms who enter into contracts with the 
City for construction and public work projects are 
required to pay the highest rate of the prevailing wage for 
such work. According to Chapter 6 of the Administrative 
Code, the Board of Supervisors fixes the highest 
prevailing rate of wages paid in private employment in 
the City, including such rates paid for overtime and 
holiday work, at least once a year. The Civil Service 
Commission furnishes to the Board of Supervisors data 



Description: 

DOCUMENTS DEPT, 

SEP 2 6 2000 

SAN FRANCISCO 
PUBLIC LIBRARY 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



regarding the highest general prevailing wages for the 
various crafts and labor job classifications paid in private 
employment in the City. Section 6.22 of Administrative 
Code states that the Board of Supervisors is not limited to 
the data submitted by the Civil Service Commission in 
determining the prevailing wage rates, but may consider 
other information as the Board of Supervisors deems 
proper. 

Under Chapter 6 City departments which have 
construction contracts with private firms must include a 
detailed statement of the prevailing wage requirements, 
including overtime and holiday pay, in the contract 
specifications. The private contractor must agree to pay 
the prevailing wage to workers performing construction 
projects for a City contract. Subcontractors of the private 
contractor are also required to pay the prevailing wage. 

Currently, the City departments which have the authority 
to enter into construction or public works contracts, which 
include Public Utilities Commission (PUC), Department 
of Public Works (DPW), Municipal Railway (Muni), 
Recreation and Park Department (RPD), the Port, and the 
Airport, are responsible for monitoring compliance with 
prevailing wage provisions. 

The proposed ordinance would create an Office of Labor 
Standards Enforcement within the Department of 
Administrative Services (DAS) that, subject to the 
transition provisions of the proposed ordinance, would 
assume the function of monitoring prevailing wage 
compliance for construction contracts. 

The proposed ordinance would make the following 
changes to Chapter 6 of the Administrative Code: 

• The penalty paid by contractors and subcontractors 
who fail to comply with the prevailing wage 
requirement would be increased from $25 to $50 per 
day for each worker who is not paid the prevailing 
wage while working on a City contract. 

• Any contractor or subcontractor who does not comply 
with the prevailing wage requirement would be subject 
to the penalties set forth in the existing Article V of 

BOARD OF SUPERVISORS 

BUDGET ANALYST 

2 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



Chapter 6. Article V provides that a contractor or 
subcontractor who violates a provision of Chapter 6 
may be declared an irresponsible bidder or unqualified 
contractor and may be debarred from working on City 
contracts for a period of up to 5 years. Additionally, 
under Article V the contractor may be liable to the 
City for a civil penalty up to $10,000 for each violation 
of Chapter 6. According Mr. Randy Riddle of the City 
Attorney's Office, the penalties set forth in Article V 
already apply to violations of prevailing wage 
requirements, and the new provision in Section 
6.22(E)(7)(a), which specifically applies such penalties 
to violations of prevailing wage requirements, clarifies 
the intent of the existing language and the existing 
practice. 

► An Office of Labor Standards Enforcement would be 
established within the Department of Administrative 
Services (DAS). The Office of Labor Standards 
Enforcement would have the responsibility to ensure 
compliance by contractors with the prevailing wage 
requirements and other labor standards imposed by 
the City Charter and Chapter 6. Other labor standards 
include a workweek of 5 eight-hour days, totaling 40 
hours in a week, and overtime pay for hours worked in 
excess of eight hours in one day or 40 hours in one 
week. The proposed ordinance provides that the Mayor 
would appoint a Labor Standards Enforcement Officer, 
who would serve at the pleasure of the Mayor. The 
Labor Standards Enforcement Officer would (a) 
develop and administer a plan for the enforcement of 
the prevailing wage requirement and other labor 
standards, (b) direct enforcement of the City's 
prevailing wage requirements subject to approval by 
the Mayor and the Director of DAS, (c) seek penalties 
for violation of the prevailing wage requirements, and 
(d) oversee the training of City personnel in labor 
standards enforcement. The proposed ordinance does 
not specify a procedure for enforcement of the 
prevailing wage requirements. 

» The Mayor may enter into a contract for the 
investigative and monitoring services required under 
the proposed ordinance. 

» City departments which have construction and public 
works contracts with private contractors would 

BOARD OF SUPERVISORS 

BUDGET ANALYST 

3 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

reimburse the DAS Office of Labor Standards 
Enforcement for costs of monitoring compliance with 
prevailing wage and other labor standards, including 
litigation costs on a work-order basis. 
• City construction and public works contracts would be 
required to contain provisions stating that the 
contractor will (a) cooperate fully with the Labor 
Standards Enforcement Officer and City employees or 
agents authorized to administer and enforce the 
prevailing wage requirements; (b) allow the Labor 
Standards Enforcement Officer to conduct random 
inspection of job sites, including timesheets, 
paychecks, payroll records, and other relevant 
documents; (c) maintain sign-in and sign-out sheets 
showing which employees are present on the job site; 
(d) post notices at the job site that the project is 
subject to prevailing wage requirements; and (e) agree 
to audits of the employer's records by the Labor 
Standards Enforcement Officer to determine 
compliance with the ordinance. 

The Office of Labor Standards Enforcement would be 
implemented upon approval of the proposed ordinance by 
the Board of Supervisors. The proposed ordinance 
provides for a transition period, allowing departments to 
maintain their existing authority to ensure compliance 
with the prevailing wage requirements and other labor 
standards. Under the proposed ordinance, the Mayor may 
transfer to the Office of Labor Standards Enforcement the 
existing authority of departments to ensure compliance 
with prevailing wage requirements and other labor 
standards. 

Fiscal Impact: According to Mr. Ryan Brooks of DAS, the estimated 

annual cost of establishing an Office of Labor Standards 
Enforcement would be approximately $720,520. The 
Attachment, provided by DAS, shows the projected budget 
for the proposed Office of Labor Standards Enforcement 
for six months of FY 2000-2001 of approximately $400,000 
and for FY 2001-2002 of approximately $720,520. 

Mr. Brooks states that the projected budget for the 
proposed Office of Labor Standards Enforcement is based 
upon the following assumptions: 

BOARD OF SUPERVISORS 

BUDGET ANALYST 

4 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



The proposed Office of Labor Standards Enforcement 
would have jurisdiction over the monitoring of 
prevailing wage compliance for City construction 
contracts. City departments which are currently 
monitoring prevailing wage compliance for their 
construction contracts would continue to do so, but 
would be accountable to the Office of Labor Standards 
Enforcement. 



The Budget Analyst notes that the estimated costs of 
the proposed Office of Labor Standards Enforcement 
would be in addition to the costs currently incurred by 
the other City departments for monitoring compliance 
with prevailing wage requirements. 

City departments would reimburse the costs of the 
proposed Office of Labor Standards Enforcement on a 
work order basis. The amount of costs borne by each 
City department would be proportional to the amount 
of each department's construction contracts. In FY 
1999-2000, five City departments (the Airport, DPW, 
PUC, Muni, and the Port) had construction contracts, 
totaling approximately $976,000,000. The voters 
approved Proposition C in March of 2000, granting 
RPD the authority to manage construction projects. 
For FY 2000-2001, DAS estimates that the Office of 
Labor Standards Enforcement costs would be 
distributed among the six City departments as follows: 





Percentage of 


Share of Costs 




Total City 


in 


Department 


Contract Costs 


FY 2000-2001 


Airport 


72.31% 


$289,240 


DPW 


15.22% 


60,880 


PUC 


9.23% 


36,920 


Muni 


1.83% 


7,320 


Port 


.41% 


1,640 


RPD 


1.00% 


4.000 


Total 


100.00% 


$400,000 



According to Mr. Brooks, the exact share of enforcement 
costs paid by each department would be negotiated during 
the budget process, based on each department's share of 
construction contracts. The Airport's share of 

BOARD OF SUPERVISORS 

BUDGET ANALYST 

5 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

enforcement costs are expected to decrease as the Airport 
construction costs, which have been largely for the 
construction of the new International Terminal, decrease, 
and the DPW share of enforcement costs are expected to 
increase, when construction of Laguna Honda Hospital, 
the San Bruno Jail, and other large projects begin. 

DAS did not provide estimates of the percent of costs of 
the proposed Office of Labor Enforcement Standards that 
would be General Fund costs. However, according to Mr. 
Brooks, most of the cost recovery would be from the 
enterprise departments, such as the Airport, the Port, and 
PUC. Mr. Brooks states that the majority of construction 
contracts for other departments are Federally funded 
(Muni) or are funded through public financing 
mechanisms, such as General Obligation bonds, Revenue 
bonds, commercial paper, or other mechanisms, and that 
the General Fund share of construction contracts is 
relatively small. 

Mr. Brooks advises that, if the proposed ordinance is 
approved, DAS would submit a supplemental 
appropriation request to the Board of Supervisors for the 
proposed Office of Labor Enforcement Standards in FY 
2000-2001. 

Comments: 1. Currently, the Airport is the only City agency with a 

separate administrative division for administration and 
proactive enforcement of prevailing wage requirements. 
According to Ms. Helen Lucas of the Airport, the 
Construction and Tenant Employment Monitoring 
Division, which is responsible for administration and 
monitoring of prevailing wage requirements for $4.2 
billion in Master Plan and facilities maintenance 
contracts and Airport leaseholder construction contracts, 
has 12 staff and an annual budget of $1,500,000. Ms. 
Lucas states that the Construction and Tenant 
Employment Monitoring Division monitors 56 
construction contracts, covering 17,000 employees and 
$1,000,000,000 in salaries. Ms. Lucas states that Airport 
contractors provide regular wage and payroll data to the 
Division and the Division monitors this data to determine 
compliance with the prevailing wage regulations. 
According to Ms. Lucas, in the first 18 months of the 

BOARD OF SUPERVISORS 

BUDGET ANALYST 

6 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



Division's operation, which commenced July 1, 1996, the 
Airport initiated withholding 50 to 60 contract payments 
due to contractors' noncompliance with prevailing wage 
requirements. Ms. Lucas states that compliance with 
prevailing wage requirements has increased and that in 
the past 12 months the Airport has only initiated 
withholding 12 contract payments due to contractors' 
noncompliance with prevailing wage requirements. 

2. Four other City agencies with a large number of 
construction contracts (DPW, PUC, the Port, and Muni) 
do not have separate administrative divisions to monitor 
and enforce prevailing wage requirements. Monitoring 
and enforcement of the prevailing wage requirements is 
the responsibility of the construction management or 
facilities maintenance divisions of each department. 
Under the current Section 6.22 of the Administrative 
Code, the prevailing wage rate is included in the contract 
specifications when a City department issues an 
Invitation to Bid on a construction contract. Construction 
contractors and subcontractors must agree to pay the 
prevailing wage as a condition of the contract and are 
required to maintain payroll records reflecting the job 
classification and wage rate of employees working on City 
contracts. Each City department with construction 
contracts is responsible for enforcing the prevailing wage 
requirements. 

3. According to Mr. Maurice Williams of DPW, DPW has 
approximately 132 active construction contracts, totaling 
$382,782,409. Contractors submit their certified payrolls 
monthly 1 to DPW prior to receiving payment for the 
contract, and DPW withholds contract payments if DPW 
determines that the contractor is not complying with the 
prevailing wage requirement. DPWs Bureau of 
Construction Management is responsible for monitoring 
compliance with the prevailing wage requirements. 
Currently, DPW reimburses the Human Rights 
Commission (HRC) on a work order basis for 1.0 FTE to 
monitor contractor payroll records for compliance with 
prevailing wage requirements. The amount of time 



1 Contractors are required to maintain payroll records for each pay period within the month and to 
submit these records ("certified payroll") monthly, prior to receiving payment on the contract. 

BOARD OF SUPERVISORS 

BUDGET ANALYST 

7 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



allocated to each contract for the HRC representative to 
monitor compliance is determined by the amount 
budgeted in that contract for monitoring compliance. Mr. 
Williams states that compliance monitoring requires 
about 0.5 percent of the contract budget, and that a 
$1,000,000 construction contract would allocate $5,000 for 
prevailing wage contract compliance. 

Mr. Williams states that not all certified payrolls 
submitted by contractors and their subcontractors are 
monitored. DPW reviews the initial payrolls to determine 
if the contractors and subcontractors are in compliance 
with the prevailing wage requirements. Additionally, 
payrolls are monitored throughout the year, when 
prevailing wage rates and associated benefits (such as 
health pension benefits) change. On a random basis 
during the contract, or if DPW receives complaints from 
workers or from the unions regarding noncompliance of a 
DPW contractor, DPW staff will conduct a site visit and 
interview contractor employees, to determine if workers 
are paid the correct hourly wage for the correct number of 
hours. The DPW resident engineer at the construction site 
is responsible for determining if the workers' jobs are 
correctly classified. According to Mr. Williams, about 20 to 
25 percent of the certified payrolls are reviewed and site 
interviews are conducted for about 5 to 10 percent of the 
contracts. 

4. According to Mr. Boon Lim of PUC, PUC has 
approximately 30 active construction contracts. Mr. Lim 
states that the PUC resident engineer working with the 
contractor is responsible for reviewing the certified 
payroll of the contractor each month. According to Mr. 
Lim, PUC staff review the certified payrolls on a random 
basis and such review requires approximately 1 to 2 hours 
per contract per month. 

5. According to Mr. Leo Bragagnolo of the Port, the Port 
has approximately 12 active construction contracts at this 
time. Mr. Bragagnolo states that monitoring compliance 
with the prevailing wage ordinance is the responsibility of 
the individual construction manager. The construction 
manager reviews the first certified payroll submitted by 
the contractor and conducts spot checks of subsequent 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



certified payrolls. According to Mr. Bragagnolo, the 
contractors are generally found to be in compliance with 
the requirements of the prevailing wage ordinance. 

6. According to Ms. Alberta Grant of Muni, Muni 
currently has approximately 100 active construction 
contracts, most of which are funded by the Federal 
Transportation Agency. Ms. Grant states that Muni 
resident engineers are responsible for collecting certified 
payrolls from the prime contractors and their 
subcontractors. These certified payrolls are then 
forwarded to Muni's Contract Compliance Office for 
review. Once they are reviewed they are returned to the 
resident engineer assigned to the project for entry into the 
files for the project. Ms. Grant states that the Contract 
Compliance Office conducts non-scheduled on-site visits of 
construction projects for various reasons, including to 
check that the employees working on the project are the 
same as that identified in the certified payroll. 
Additionally, Ms. Grant states that the Contract 
Compliance Office receives a few complaints from workers 
or from unions regarding the problems at Muni 
construction projects. Such complaints are tracked until 
the problem is identified and resolved. Ms. Grant states 
that only a portion of the complaints received are about 
the certified payroll and that most of the complaints are 
minor and can be settled easily. 

7. Proposition C, which was passed by the San Francisco 
voters in March of 2000, amended the City Charter to give 
RPD the authority to enter into major construction 
projects. According to Mr. Rick Kimball of RPD, RPD is 
in the process of setting up a program to monitor 
compliance with prevailing wage requirements as part of 
its construction management program. Mr. Kimball 
states that, currently, DPW is managing RPD 
construction projects, including prevailing wage 
compliance. 

8. As noted above, the Airport, DPW, PUC, Muni, and the 
Port currently have procedures in place to monitor 
contractor payroll information and to determine 
compliance with prevailing wage requirements. These 
departments determine compliance with the prevailing 

BOARD OF SUPERVISORS 

BUDGET ANALYST 

9 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

wage requirements prior to issuing payments to the 
contractors 

The proposed ordinance would authorize the DAS Labor 
Standards Enforcement Officer to develop and implement 
a plan for enforcement of the prevailing wage 
requirements and to direct the City's enforcement of such 
requirements. The proposed ordinance requires that City 
departments cooperate with the Labor Standards 
Enforcement Officer. In addition to the monitoring 
functions currently performed by City departments, the 
Labor Standards Enforcement Officer would be 
responsible for seeking penalties for violations of the 
prevailing wage requirement, including filing charges and 
seeking debarment 2 of a contractor. The Labor Standards 
Enforcement Officer would also oversee the training of 
City personnel in the area of labor standards 
enforcement. 

9. According to Mr. Riddle, the proposed ordinance would 
apply only to construction contracts, pursuant to 
Administrative Code Chapter 6, and would not apply to 
classifications which are subject to prevailing wage 
provisions under separate City ordinances or 
Administrative Code chapters, such as janitorial services. 

Recommendation: Because City departments with responsibility for 

monitoring prevailing wage compliance would continue to 
do so, the new Office of Labor Standards Enforcement 
would result in additional costs to the City. Therefore, 
the Budget Analyst considers approval of the proposed 
ordinance to be a policy matter for the Board of 
Supervisors. 



2 "Debarment" would include termination of the contractor from the existing contract and exclusion 
of the contractor from future City contracts. 

BOARD OF SUPERVISORS 

BUDGET ANALYST 

10 



Attachment 



Prevailing Wage Enforcement Budget FY 00-01 



Biweekly FY 00-01 FY 00-01 FY 01-02 

Class FTE* Salary Salary Total Total 

01 Salaries 

Special Assistant XV 1375 0.6 3,846 59,998 59,998 100,381 

Sr. Management Assistant 1844 0.6 2,514 39,218 39,218 65,615 

Special Assistant VI 1365 0.6 1,859 29,003 29,003 48,524 

027 Contract Audits " 250,000 500,000 

040 Materials & Supplies 

2 computers @ 3000 ea 6,000 

1 printer 1,000 

1 fax 2,000 

misc office supplies 1 ,000 1 ,000 

081 Workorders for LHP, DTIS, CAT 10,000 5,000 



TOTAL 398,219 720,520 



* Assumes a hiring date of November 15, 2000 

** The Labor Standards Officer may also allocate some portion of the contract audit budget via 

workorder to the Audit Division of the Controller's Office. 



Source: Department of Administrative Services 



11 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Item 2 - File 00-1608 

1. This is a hearing to consider the release of $1,414,943 in reserved funds in 
the Fire Department's Fiscal Year 2000-01 budget for overtime expenditures. 

2. During the FY 2000-01 budget hearings, the Finance and Labor Committee 
recommended that one third of annual overtime expenditure budget for several City 
departments be placed on reserve so that the Committee can monitor spending for 
overtime during the fiscal year. The Fire Department's approved FY 2000-01 
General Fund budget includes overtime expenditures of $6,475,028. $1,866,591 of 
this amount was placed on reserve, leaving $4,608,437 available for expenditure. 

3. In a letter to the Finance Committee dated September 8, 2000, Acting Chief 
of the Fire Department Tabacco sent a letter to the Finance and Labor Committee 
requesting that the Committee release $1,414,943 of the $1,866,591 in previously 
reserved overtime funds. The letter attributed high overtime spending through the 
first 3.5 pay periods of FY 2000-01 to the following: 

• The need to increase staffing of Fire Department sworn personnel 
assigned to the City's Emergency Communications Center from 40 to 59; 

• Increased use of sick leave, temporary disability pay and light duty 
associated with pending retirements, causing vacancies in Fire 
Suppression staffing and increased overtime to meet min imum daily 
staffing requirements; and, 

• A high rate of "retirements and retirement payouts" during the first two 
months of the fiscal year. 

4. The Controller's latest projection report for salary and fringe benefit 
expenditures (including overtime) shows that as of the pay period ending September 
1, 2000, the Fire Department has incurred General Fund overtime expenditures of 
$3,255,088. Therefore, through September 1, 2000 (or 4.5 of 26.0 pay periods in FY 
2000-01) the Fire Department has already expended 50.3 percent of its total 
overtime appropriation of $6,475,028, and 70.6 percent of its available, unreserved 
overtime funding of $4,608,437. 

Based on all salary and fringe benefit expenditures incurred during the pay 
period ending September 1, 2000, the Fire Department is projected to spend a total 
of $16,358,055 on overtime which is 152.6 percent or $9,883,027 more than the 
Department's total FY 2000-01 overtime appropriation of $6,475,028. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

12 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

5. As of the writing of this report, the Controller's Office is working with the 
Fire Department to provide an estimate of overall salary and fringe benefit 
expenditures for FY 2000-01 because: 

• Insufficient data is available at this time to develop a sound estimate of 
lump sum salary payments (for accumulated sick leave, compensatory 
time and vacation pay) to Firefighters that will retire during the current 
Fiscal Year; and, 

• The Controller's Office is also reviewing budgetary requirements for 
Firefighter premium pay in order to calculate additional funding that may 
be required from the General Fund Salary and Fringe Benefits Reserve. 

6. In addition to the Salary and Fringe Benefits Reserve transfer to the Fire 
Department budget, which will decrease the projected overall Fire Department 
budget deficit, the Fire Department estimates that the planned hiring of new 
personnel during the fiscal year will decrease the need for overtime expenditures 
since the new personnel will lessen the need to backfill vacant positions in order to 
meet scheduled staffing in Fire Suppression. 

Overall, Ms. Debra Ward, Chief Financial Officer of the Fire Department, 
currently estimates that the Department will end FY 2000-01 with an overtime 
deficit of between $2.5 and $3.5 million and that this deficit will be substantially 
offset by salary and fringe benefit savings and anticipated surplus revenue from the 
Bureau of Fire Prevention. However, Ms. Ward's projection does not take into 
account funding that will be transferred to the Fire Department budget from the 
Salary and Benefits reserve, offset by further projected deficits that will result from 
lump sum salary payments to Firefighters that will retire during the current Fiscal 
Year. 

Based on year to date and expected retirements for the fiscal year, the 
projected deficit from lump sum salary payments for accumulated sick leave, 
compensatory time and vacation pay could amount to between $3,000,000 and 
$5,000,000 by the end FY 2000-01. It is likely therefore that a supplemental 
appropriation for the Fire Department will be required during Fiscal Year 2000- 
2001. However, at this point in the Fiscal Year, the amount of such a supplemental 
appropriation cannot be determined at this time. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

13 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

7. At the current rate of overtime spending, the Fire Department will exceed the 
$4,608,437 available, unreserved overtime appropriation during the pay period 
ending October 13, 2000. Using the same rate of spending, the Fire Department will 
exceed its total overtime appropriation of $6,475,028 by the end of November of 
2000. Therefore the Fire Department's entire FY 2000-2001 budgeted overtime 
funds will be spent with seven months of the fiscal year still remaining (December 
through June of 2001). 



8. The Fire Department is currently preparing a spending plan for FY 2000-01 
for review by the Controller's Office. Also, as noted above, the Controller is 
presently calculating the amount of funding required from the General Fund Salary 
and Fringe Benefits Reserve to fund the Fire Department's MOU-related 
expenditures for sick leave buyouts and premium pay. Until such information is 
finalized, a reliable year end spending projection for the Fire Department cannot be 
completed. 

Recommendation: Continue this hearing one week in order to allow for the 
compilation of additional data to provide a year end projection 
of Fire Department spending. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

14 



Memo to the Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Item 3 - File 00-0635 

Note : This proposed ordinance was continued by the Finance and Labor Committee 
at its meeting of September 20, 2000 in order to receive comments from the 
Public Utilities Commission. According to Mr. Lawrence Klein of the PUC, 
the Public Utilities Commission will consider the proposed ordinance at its 
meeting of September 26, 2000 and the results of this consideration will be 
reported to the Finance and Labor Committee at its meeting of September 27, 
2000. 

Item: Ordinance Amending Article 7 of the San Francisco 

Administrative Code by adding a new Section 2A1.35, 
providing that, effective in FY 2000-2001, a portion of 
surplus Hetch Hetchy revenues previously transferred to the 
General Fund would be appropriated for PUC capital projects 
instead of retained in the General Fund, and providing for 
annual increases of the percentage of such surplus Hetch 
Hetchy revenues to be retained by the Public Utilities 
Commission for PUC capital projects instead of transferring 
such monies to the General Fund. 

Description: Charter Section 16.103(b)3 provides that the Public Utilities 

Commission, with the concurrence of two-thirds of the Board 
of Supervisors, may authorize the transfer of any portion of 
Hetch Hetchy surplus funds, as defined by the Charter, to 
the General Fund upon making all of the following findings 
of fact and judgment: 

(A) That a surplus exists or is projected to exist after meeting 
the requirements of this section; 

(B)That there is no unfunded operating or capital program 
that by its lack of funding could jeopardize health, safety, 
water supply or power production; 

(C)That there is no reasonably foreseeable operating 
contingency that cannot be funded without General Fund 
subsidy (meaning that the unappropriated fund balance 
for the Hetch Hetchy operating fund is sufficient to meet 
any "reasonably foreseeable operating contingency"); and 

(D)That such a transfer of funds in all other respects reflects 
prudent utility practice. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

15 



Memo to the Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



The proposed ordinance states that whenever surplus Hetch 
Hetchy revenues are transferred to the General Fund, a 
portion of that transfer shall instead be appropriated to the 
PUC for "construction, rehabilitation and repair of potable 
water distribution and wastewater collection facilities under 
the control and authority of the PUC". 

The proposed ordinance further provides that 10 percent of 
the FY 2000-2001 Hetch Hetchy surplus transferred to the 
General Fund shall be reappropriated to the PUC for capital 
projects. 

Lastly, the proposed ordinance states that for all fiscal years 
subsequent to FY 2000-2001, 10 percent of the amount of 
surplus Hetch Hetchy revenues to be transferred to the 
General Fund shall instead by reappropriated to the PUC for 
PUC capital projects and such surplus for the PUC shall 
increase by ten percent each fiscal year. Based on this 
proposed provision, after ten years, beginning in FY 2010- 
2011, all surplus Hetch Hetchy revenues that would have 
otherwise been transferred to the General Fund shall instead 
be appropriated for PUC capital projects including 
construction, rehabilitation and repair of potable water 
distribution and wastewater collection facilities under the 
control and authority of the PUC, with no further Hetch 
Hetchy transfers to the General Fund. 

Comments: 1. The FY 2000-2001 budget, as adopted by the Board of 

Supervisors, is based on total General Fund revenue sources 
that include a transfer of Hetch Hetchy surplus revenues to 
the General Fund in the amount of $29,850,000. This Hetch 
Hetchy transfer for FY 2000-2001 is $10,000,000 or 25.1 
percent less than the $39,850,000 transfer for FY 1999-2000. 

If this proposed ordinance is adopted, ten percent of the FY 
2000-2001 $29,850,000 Hetch Hetchy transfer to the General 
Fund, or $2,985,000, must be appropriated to the PUC for 
the PUC capital program. Such a reappropriation of General 
Fund sources would reduce the FY 2000-2001 General Fund 
General Reserve by $2,985,000 from $30,013,905 to 
$27,028,905. The percentage of surplus Hetch Hetchy funds 
to be appropriated to PUC capital programs instead of being 
transferred to the General fund would be increased 10 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

16 



Memo to the Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



percent each year thereafter until FY 2009-2010 when 100 
percent of such surplus funds would be appropriated to the 
PUC capital program instead of being transferred to the 
General Fund. 

2. The decreased FY 2000-2001 Hetch Hetchy surplus 
transfer to the General Fund described in Comment 1 above 
is due to a combination of factors, including reduced revenue 
due to deregulation of the electric utility industry and 
increased expenditures for facilities maintenance and capital 
improvements. Over many years, the Hetch Hetchy surplus 
transfer to the General Fund has been a volatile revenue 
source, subject to a high degree of fluctuation. In dry years, a 
reduced water supply has resulted in reduced hydroelectric 
generation and reduced revenue. Even in wet years, storm 
damage has reduced the Hetch Hetchy surplus transfer to 
the General Fund because of increased facilities maintenance 
expenditures for repair and reconstruction. 

The table below shows the amount of the Hetch Hetchy 
transfers to the General Fund for each of the last ten fiscal 
years, from FY 1991-92 to FY 2000-2001. The table shows 
that the amount of the Hetch Hetchy transfer to the General 
Fund has ranged from a low of $11,000,000 to a high of 
$$45,703,000. The average amount of the Hetch Hetchy 
transfer over the last ten years was $31,023,600. 

Hetch Hetchy Equity Transfers to the General Fund 

Source: Annual Appropriation Ordinance 





Hetch Hetchy 


Fiscal Year 


Transfer to General Fund 


2000-2001 


$29,850,000 


1999-2000 


39,850,000 


1998-99 


42,703,000 


1997-98 


45,703,000 


1996-97 


37,703,000 


1995-96 


30,165,000 


1994-95 


25,462,000 


1993-94 


30,800,000 


1992-93 


17,000,000 


1991-92 


11,000,000 


BOARD OF SUPERVISORS 



BUDGET ANALYST 

17 



Memo to the Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



Average: 


531,023,600 


Minimum: 


511,000,000 


Maximum 


545,703,000 



3. The PUC has previously reported to the Board of 
Supervisors that, based on a draft 1998 12 year capital plan, 
spending requirements for the PUC's Water and Sewer 
enterprises amount to approximately $3,500,000,000. 
Funding for most such capital spending will require the 
expenditure of currently authorized revenue bonds and the 
authorization of new revenue bonds. 

To the extent that PUC available funding is increased in the 
future through a reduction in Hetch Hetchy funds 
transferred to the General Fund, the need for future capital 
project funding through the issuance of revenue bonds can be 
reduced or, alternatively, increased capital projects can be 
completed. 

However, the Budget Analyst notes that a reduction in 
General Fund funding sources through the gradual decrease, 
and eventual elimination, of the Hetch Hetchy transfer, will 
require either reduced General Fund spending, new General 
Fund revenue or some combination of the two in order to 
balance the General Fund budget in future fiscal years. 

The table below illustrates the amount of the Hetch Hetchy 
transfer that would not be transferred to the General Fund 
and instead be retained by to the PUC for appropriation to 
the PUC capital program, assuming that the transfer amount 
remains constant over the next ten years at FY 2000-2001 
levels. As noted above, the amount of the transfer can vary 
significantly. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

18 



Memo to the Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 







Percentage to be 




Cumulative Amount to 




Assumed 


Appropriated for PUC 


Amount to be 


be Appropriated for 




Amount of Hetch 


Capital Projects Instead 


Appropriated for 


PUC Capital Projects 




Hetchy Transfer 


of Being Retained by 


PUC Capital 


and Not Retained by 


Fiscal Year 


to General Fund 1 


the General Fund 


Projects 


the General Fund 


2000 -01 


$ 29,850,000 


10% 


$ 2,985,000 


- 


2001 -02 


29,850,000 


20% 


5,970,000 


S 8,955,000 


2002 -03 


29,850,000 


30% 


8,955,000 


17,910,000 


2003 -04 


29,850,000 


40% 


11,940,000 


29,850,000 


2004 -05 


29,850,000 


50% 


14,925,000 


44,775,000 


2005 -06 


29,850,000 


60% 


17,910,000 


62,685,000 


2006 -07 


29,850,000 


70% 


20,895,000 


83,580,000 


2007 -08 


29,850,000 


80% 


23,880,000 


107,460,000 


2008 -09 


29,850,000 


90% 


26,865,000 


134,325,000 


2009-10 


29,850,000 


100% 


29,850,000 


164,175,000 



Recommendation: 



Approval of the proposed ordinance is a policy matter for the 
Board of Supervisors. 



1 Amount of Hetch Hetchy Transfer to General Fund is assumed to be constant beginning with the 
transfer budgeted for FY 2000-01. The actual funds available for transfer to the General Fund can 
vary significantly as discussed in Comment 2. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

19 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Item 4 - File 00-1596 



Department: 
Item: 



Description: 



San Francisco Police Department (SFPD) 

Ordinance amending Chapter 10 of the San Francisco 
Administrative Code by adding Section 10.117-124, 
establishing a special account for the receipt and 
expenditure of funds and property received in restitution 
and forfeitures in various criminal enterprise 
investigation cases. 

The proposed ordinance would establish a special account 
for the SFPD to deposit funds obtained through Court- 
ordered restitution or from the sale of forfeited tangible 
property that was acquired through criminal enterprise 
activity. Under the proposed ordinance, criminal 
enterprise cases include, but are not limited to, organized 
bookmaking, gambling, pimping, pandering, and 
prostitution. The special account would be known as the 
Criminal Enterprise Investigations Restitution/ 
Forfeiture Account. 



According to the proposed ordinance, monies in the 
subject account would be expended exclusively for the 
SFPD to investigate criminal enterprise cases, including 
payment of overtime for investigations. The funds would 
be used for the purchase of equipment, supplies and 
contractual services, the rental of undercover vehicles, 
gambling and wagering funds 1 , and overtime related to 
criminal enterprise investigations, and other similar uses. 

Approval of the proposed ordinance would authorize the 
SFPD to (a) establish the Criminal Enterprise 
Investigations Restitution/ Forfeiture Account for the 
deposit of funds from restitution and forfeitures, including 
funds obtained from the sale of tangible property received 
through various criminal enterprise cases and (b) expend 
funds deposited into the subject account to investigate 
criminal enterprise cases. 



1 According to Captain John Goldberg of the SFPD, "wagering and gambling" funds are cash used in 
police operations targeting bookmakers, illegal gambling, and other activities. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

20 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



revised 
9/22/00 



Expenditures under the proposed account would not be 
subject to Board of Supervisors appropriation approval, 
including payment of overtime for investigations. 

Comments: 1. Administrative Code Section 10.117-54 provides for a 

similar special account, the Narcotics Forfeiture and 
Asset Seizure Fund, to deposit monies seized from 
narcotics investigations. Narcotics Forfeiture and Asset 
Seizure Fund expenditures are used exclusively for 
purposes related to the enforcement of narcotics law. The 
Narcotics Forfeiture and Asset Seizure Fund differs from 
the proposed special account in that the Narcotics 
Forfeiture and Asset Seizure Fund was (a) established 
pursuant to both Federal and State legislation and use of 
the funds is subject to Federal and State restrictions; (b) 
requires Board of Supervisors appropriation approval for 
all fund expenditures in excess of $10,000, except for 
expenditures needed for criminal investigation services; 
and (c) requires quarterly reports to the Mayor and the 
Board of Supervisors regarding expenditures from the 
fund. 

2. According to Captain John Goldberg of the SFPD, the 
SFPD proposes to establish the Criminal Enterprise 
Investigations Restitution/ Forfeiture Account to provide 
a mechanism, similar to the Narcotics Forfeiture and 
Asset Seizure Fund noted above, to receive funds obtained 
through Court-ordered restitution or forfeiture of property 
in various criminal enterprise cases other than narcotic 
cases. Captain Goldberg states that currently, SFPD only 
receives tangible property through the Narcotics Asset 
Forfeiture Program. The proposed ordinance would 
change the existing practice by establishing a special 
account to receive funds from forfeitures and restitution, 
including funds from the sale of tangible property seized 
through investigations of criminal enterprise cases. 
Expenditure of funds from the proposed special account 
would be earmarked for Police investigations, as 
described above. 

3. According to Captain Goldberg, in FY 2000-2001 the 
SFPD has allocated approximately 30,000 hours of 
overtime to the Investigations Bureau for investigations, 
arrests, and miscellaneous expenditures. The overtime 
funds are allocated on a case-by-case basis, depending 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

21 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



upon the amount of overtime required to complete an 
investigation and the availability of other forms of 
reimbursement. Captain Goldberg states that confidential 
investigations of operations, such as gambling or fencing, 
can be long and expensive, requiring the allocation of a 
large number of overtime hours. According to Captain 
Goldberg, the proposed special account would provide 
funds in addition to the monies in the SFPD budget to 
conduct such investigations, including the payment of 
overtime for investigations. 

4. Captain Goldberg states that, in addition to providing a 
mechanism for the deposit of funds received from Court- 
ordered restitution or forfeiture of property described 
above, the special account would receive funds from cost 
recovery fees awarded to the SFPD in dispute resolution 
hearings. Currently, the District Attorney's Office refers 
some criminal cases, such as prostitution or crimes 
against prostitutes, gambling, bookmaking, illegal tobacco 
or alcohol sales, or massage parlor permit violations, to a 
dispute resolution hearing rather than to a trial court. 
The District Attorney has a contract with a private 
organization, California Community Dispute Services 
(Dispute Services), to conduct resolution hearings on 
these cases. If the Dispute Services hearing officer 
determines that the individual violated the law, the 
hearing office assesses a cost recovery fee for the violation 
to be paid by the individual to the City. The cost recovery 
fees are based upon documentation provided by the SFPD 
and generally ranges from $300 to $500 per case. In 
addition, the individual must pay to Dispute Services a 
fee for the hearing, ranging from approximately $100 to 
$250. 

5. In March of 2000, the Controller issued an audit report, 
identifying problems in the receipt and expenditure of 
dispute hearing cost recoveries and recommending 
corrective action. The Controller determined that the 
SFPD (a) did not maintain adequate records of the monies 
that it collected, (b) did not deposit all of the collected 
monies into the General Fund, as required by City 
procedures, (c) deposited some of the monies 
inappropriately into other SFPD accounts or used monies 
inappropriately to pay for goods and services; and (d) 

BOARD OF SUPERVISORS 

BUDGET ANALYST 

22 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



incorrectly classified the monies as "reductions in 
expenditures" rather than as revenues. 

Prior to the Controller's audit, the cost recovery fees were 
collected by the SFPD Vice Crimes Division and paid by 
cashier check to the Vice Crimes Division. As a result of 
the Controller's audit and to avoid misappropriation of 
the funds, the SFPD procedure was changed. Under the 
new procedure, the cost recovery fees are collected by 
Dispute Services, paid by cashier check to the City and 
County of San Francisco, and deposited into the General 
Fund. From January 2000 through August 2000 the 
SFPD received a total of $40,716.71 of such cost recovery 
fees, which were deposited into the General Fund. 

The Controller's audit approved the procedural changes 
implemented by the SFPD in December of 1998, and did 
not recommend a special account for deposit and 
expenditure of such funds. Captain Goldberg states that 
the procedural changes resolved the accounting and 
procedural problems but that they did not resolve the 
issue of reimbursement to the Department for expenses 
incurred. According to Captain Goldberg, it is the 
intention of the Court and Dispute Services to reimburse 
the SFPD directly for the expense of conducting 
investigations. The Budget Analyst notes that the cost 
recovery fees are deposited to the General Fund, and 
therefore offset General Fund contributions to the SFPD 
to conduct such investigations. 

6. According to Captain Goldberg, expenditure of funds 
from the proposed special account, including payment for 
overtime for investigations, would be authorized by the 
Chief of Police and would not require appropriation 
approval by the Board of Supervisors. The proposed 
ordinance provides that administration of the account and 
expenditure of such funds would be in accordance with 
the City Charter and the procurement procedures 
prescribed by the Controller and the City Purchaser. 
Captain Goldberg states that "the Department believes 
that the special account does not require Board of 
Supervisors appropriation approval because the ordinance 
itself contains sufficient controls which limit the purposes 
for and the manner in which the funds will be expended". 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

23 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



As noted previously, the Narcotics Forfeiture and Asset 
Seizure Fund requires appropriation approval by the 
Board of Supervisors for expenditures greater than 
$10,000, except for narcotics investigations. 

7. In the attached memorandum (Attachment), the SFPD 
states that the proposed Criminal Enterprise 
Investigations Restitution/Forfeiture Account "would 
provide additional resources to the Police Department to 
conduct these types of investigations and would be 
consistent with the judicial intent, that in some cases, the 
Police Department should be awarded reimbursement or 
restitution for the expenses it incurred conducting that 
investigation". 

8. According to the Controller's audit report, from July 
1997 through December 1998, the SFPD collected 
$283,495 in Dispute Services cost recovery fees. 
Beginning in December of 1998, the SFPD began 
depositing these cost recover}' fees to the General Fund. 
From January 1999 through August 2000, the SFPD has 
deposited $129,313 in cost recovery fees to the General 
Fund, which offset the General Fund cost of the Police 
Department. 

9. Under the proposed ordinance, all restitution and 
forfeiture monies from criminal enterprise cases, 
including funds obtained from the sale of tangible 
property and cost recovery fees noted above, would not be 
deposited to the General Fund. These monies would 
instead become immediately available for discretionary 
expenditure by the Police Department without Board of 
Supervisors appropriation approval, including payment of 
overtime for investigations. Such funds would be 
expended in addition to expenditures approved by the 
Mayor and Board of Supervisors for the Police 
Department's annual budget. In the professional 
judgment of the Budget Analyst, the proposed special 
account is not only not needed but would permit the 
Police Department to expend funds without obtaining 
appropriation approval of the Board of Supervisors. 



Recommendation: Disapprove the proposed ordinance. 



BOARD OF SUPERVISORS 

BUDGET ANALYST 

24 




FREDH.LAU 

CHIEF OF POLICE 



POLICE DEPARTMENT 

CITY AND COUNTY OF SAN FRANCISCO 

THOMAS ). CAHILL HALL OF JUSTICE 

850 BRYANT STREET 
SAN FRANCISCO, CALIFORNIA 94103 



Memorandum 



au let cam Kiii- 
Page 1 of 2 



To: 
From: 

Date: 

Subject: 



Finance and Labor Committee Members 

John R. Goldberg ^^-^C^ny^ 

Fiscal Divisioirv^/ 

San Francisco Police Department 

Thursday, September 21, 2000 

Criminal Enterprise Investigations Restitution/Forfeiture Special Account 
File NO: 00-1596 



Recommended Action 

The Police Department recommends that the Committee amend Chapter 10 of the San Francisco 
Administrative Code by adding Section 10.1 17-124, establishing a special account to record and 
deposit monies recovered from individuals and other entities assessed restitution, forfeiture or 
seizure for violating laws and ordinances. The establishment of this account would allow the 
Police Department to receive money directly or through the sale of tangible property, as ordered 
by the court, and to appropriate funds from this account for investigative purposes. 



Background 

The establishment of this account is in response to the Controller's audit of the Vice Crimes 
Division, which was completed in March of this year. Prior to the audit, funds received from cost 
recovery were collected by the SFPD Vice Crimes Division and used, in general, for investigative 
purposes; however, the Department and the Vice Crimes Division lacked legislative authority to 
do so. In response to those initial findings, the Police Department took immediate corrective 
action and, in the interim, began depositing those funds in the Police Department's General Fund 
as revenue. During this time, the Department awaited the Controller's final report. As revenue, 
the funds flow to the City's General Fund and are not earmarked for police investigative 
purposes. They are used as an offset to General Fund support of the Police Department. This 
ordinance provides appropriate controls and legislative authority to make those funds 
immediately available to the Police Department for specific investigative purposes. 



25 



Attachment 
Page 2 of 2 



Criminal Enterprise Investigations Restitution/Forfeiture Special Account 
File NO: 00-1596 
Page 2 



Analysis/Reason for Recommendation 

Without this legislation, the Department has no mechanism to expend court ordered restitution or 
forfeitures except through the budget process. While budgets are planned many months in 
advance, investigations are sometimes initiated on a moment's notice. Time and confidentiality 
make it imprudent to use the supplemental appropriation process for this purpose. The ordinance 
would provide additional resources to the Police Department to conduct various criminal 
enterprise investigations. Investigations of these types would include organized bookmaking, 
fencing, gambling, pimping, pandering and prostitution. Additionally, the legislation would be 
consistent with judicial intent, that in some cases, the Police Department should be awarded 
reimbursement or restitution for the expenses it incurred conducting that investigation. Many of 
these types of cases can be prolonged and expensive. Without a means to recover those costs, 
there is a reticence to commit substantial resources. To do so, would be at the expense of other 
investigative priorities, which the Department is unwilling to do. 

Moreover, restitution or seizure could only take place after a criminal conviction or as part of a 
court-authorized disposition. Court authorized dispositions would include cases referred by the 
District Attorney to pretrial diversion programs. 



Fiscal Implications 

Overall, the proposal is cost neutral; however, there would be a minor impact to the City's 
General Fund. This ordinance would authorize ongoing expenditures not to exceed the funds 
available in the special account. Deposits for the first nine months of the current calendar year 
total 540,716.71. 



26 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Item 5 -File 00-1556 

Department: Purchasing Department 



Item: 



Description: 



Comments: 



Resolution designating El Latino newspaper to provide 
outreach advertising services to the City for the 
Hispanic/Latino community, and designating Asian Week 
and the International Daily News to provide outreach 
advertising to the City for the Chinese community; and 
authorizing the Purchasing Department to execute 
contracts with only those outreach newspapers that fully 
comply with all City contracting requirements, including 
equal benefits requirements, and in accordance with the 
highest scores and ranking resulting from the evaluation 
of bids received for outreach advertising; and further 
urging the San Francisco Redevelopment Agency and the 
San Francisco Housing Authority to cooperate with the 
Clerk of the Board and the City Purchaser to use the 
outreach newspapers; and further recommending the 
Clerk of the Board and the City Purchaser to jointly 
oversee outreach newspapers contract to ensure 
compliance regarding advertising, publication and 
translations; and further authorizing the Clerk of the 
Board and the Purchasing Department to explore and 
recommend to the Board additional outreach newspapers 
for communities of Russian, Southeast Asian, Korean and 
Filipino populations. 

Proposition J, which was approved by the San Francisco 
electorate in November of 1994, provided, in part, for an 
Outreach Advertising Fund to be established for the 
purpose of the City placing "outreach advertising" or 
weekly notices of items pertaining to governmental 
operations in periodicals selected to reflect the diversity in 
race and sexual orientation of the population of the City. 
Outreach advertisements include, but are not limited to, 
information about issues that are being reviewed by the 
Board of Supervisors and that directly affect the public. 
Proposition J requires the City to withhold 10 percent of 
the amounts paid for official advertising and deposit the 
monies in the Outreach Advertising Revenue Fund. 

1. The City's official advertising is divided into two 
categories: 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

27 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



Tvpe 1 - Advertisements for Two or More Consecutive 
Davs: Official advertising which must be published on 
two or more consecutive days, and all official advertising 
which is required to be published in accordance with 
Section 2.103 of the Charter for special meetings of the 
Board of Supervisors and its standing or special 
committees. The Official Newspaper must publish at least 
5 days a week for Type 1 Advertising. 

Type 2 - Advertisements for Single or Non-consecutive 
Davs : Official advertising, which must be published one 
time (other than one-time advertising related to special 
meetings for the Board of Supervisors and its standing 
and/or special committees) or more than one time but not 
more than three times per week for a specified number of 
weeks. The Official Newspaper must publish at least 3 
days a week for Type 2 Advertising. 

Pursuant to Proposition J and in accordance with Section 
2.81-2(a) of the Administrative Code, the City is required 
to withhold 10 percent of the annual amounts paid for the 
City's Type 1 and Type 2 official advertising and to 
deposit these monies into the Outreach Advertising Fund. 

The Purchasing Department estimates that the FY 2000- 
2001 cost for the City's Type 1 ($23,860) and Type 2 
($917,670) official advertising would total $941,530. 
Therefore, the estimated amount available for outreach 
advertising is $94,153, or 10 percent of the $941,530. 

2. According to Mr. Harold Guetersloh of the Controller's 
Office, there is a balance of approximately $65,133 in the 
Outreach Advertising Fund as of September 20, 2000. 

3. Since the passage of Proposition J, approved by the 
voters in November of 1994, bid prices are only one of 
several factors evaluated and considered when 
determining the designated outreach newspaper. With the 
passage of Proposition J, the Purchasing Department is 
required to recommend to the Board of Supervisors the 
newspaper with the highest total point score. According to 
the Purchasing Department, the International Daily 
News received the highest score of all bids received, El 
Latino received the second highest score of the two 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

28 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



Hispanic papers, and Asian Week had the third highest 
score of the six Chinese newspapers. 

4. The International Daily News does not comply with 
the City's Administrative Code and does not qualify to be 
an outreach advertising newspaper under the bidding 
process because The International Daily News is not 
printed in San Francisco and does not comply with the 
requirements of chapter 12B, the equal benefits 
requirement of the Administrative Code. However, 
according to Mr. Luis Espinoza of the Purchasing 
Department, the International Daily News is in the 
process of complying with the equal benefits requirement 
through the Human Rights Commission. 

El Latino does not comply with the City's Administrative 
Code and does not qualify to be an outreach advertising 
newspaper under the bidding process because El Latino is 
published monthly and is not published weekly as 
required, and their bid was submitted to the Purchasing 
Department late. 

5. Mr. Edwin Lee, Director of Purchasing at the 
Department of Administrative Services, states in a letter 
dated May 10, 2000 to the Clerk of the Board, that the 
Board of Supervisors may designate a non-qualifying 
newspaper to provide neighborhood outreach advertising 
services to those communities who are underserved by the 
qualifying newspapers. Mr. Rob Maerz of the City 
Attorney's Office, advises that Section 2.81-4 of the 
Administrative Code states, "If the Board of Supervisors 
finds that certain neighborhoods are not being adequately 
served by the official newspaper(s) and the outreach 
periodicals, the Board may authorize additional 
advertising in monthly neighborhood publications which 
target certain neighborhoods in San Francisco. (Added by 
Proposition J, 11/8/94.)" Therefore, according to 
Mr. Maerz, in the subject resolution, the Board of 
Supervisors may find that the Chinese and Hispanic 
communities are underserved and designate the 
International Daily News and El Latino to provide 
neighborhood outreach advertising services to the Chinese 
and Hispanic communities even though the International 



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BUDGET ANALYST 

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Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Daily News and El Latino do not qualify to be outreach 
advertising periodicals through the bidding process. 

6. El Latino would join El Reportero, which has 
previously been authorized by the Board of Supervisors as 
an outreach advertising periodical, to provide outreach 
advertising to the Hispanic community. The International 
Daily News and Asian Week would join the Chinese 
Times, which has previously been authorized by the 
Board of Supervisors as an outreach periodical, to provide 
outreach advertising to the Chinese community. 

7. According to the Purchasing Department, Asian Week 
fully complies with all City contracting requirements and 
qualifies to be an outreach advertising newspaper 
through the bidding process. 

Recommendation: Approval of the proposed resolution is a policy matter for 

the Board of Supervisors. 






BOARD OF SUPERVISORS 
BUDGET ANALYST 

30 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Items 6 and 7 - Files 00-1265 and 00-1267 

Note: These items were continued by the Finance and Labor Committee at its 
meetings of August 23, 2000 and September 20, 2000. The Transportation 
and Land Use Committee, at its meeting of August 22, 2000, recommended 
that File 00-1265 be moved to the full Board of Supervisors for approval. 

Departments: Department of Administrative Services, Real Estate Division 

Department of City Planning 

Mayor's Office of Business and Economic Development 
Redevelopment Agency 

Item: Item 5. File 00-1265: Resolution affirming the certification of 

the Yerba Buena Redevelopment Project Area 
Expansion/Emporium Site Development Final Supplemental 
Environmental Impact Report by the Planning and 
Redevelopment Agency Commissions, and adopting 
environmental findings (and a statement of overriding 
considerations) pursuant to the California Environmental 
Quality Act and State Guidelines in connection with adoption 
of the Yerba Buena Redevelopment Project Area 
Expansion/Emporium Site Development Project, and various 
other actions necessary to implement the project. 

Item 6. File 00-1267: Resolution approving and authorizing 
a Tax Increment Allocation Pledge Agreement between the 
City and County of San Francisco and the Redevelopment 
Agenc3 T , under which the City agrees to a pledge by the 
Redevelopment Agency of a portion of the available non- 
housing tax increment generated by the redevelopment of the 
project site (specifically including Assessor's Block 3705, Lots 
9, 10, 12, 13, 14, 15, 17, 18, 33, 38, and 43) in favor of 
Emporium Development, L.L.C., a subsidiary of Forest City 
Enterprises, Inc. in furtherance of the implementation of the 
Redevelopment Plan amendment for the addition of the 
Emporium Site Area to the Yerba Buena Center Project 
Area; approving and authorizing a financing agreement and 
covenant to operate in connection with the development of 
the Emporium Site Area; approving an allocation of tax 
increment for affordable housing purposes in excess of the 
minimum amount required under Redevelopment Law; 
making elections with respect to the allocation of tax 
increment; adopting findings pursuant to the California 
Environmental Quality Act; and adopting findings that the 

Board of Supervisors 

Budget Analyst 

31 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

agreement is consistent with the City's General Plan and 
Eight Priority Policies of City Planning Code Section 101.1. 

Description of 

the Project: Emporium Development, L.L.C. (the Developer) 1 has 

proposed redeveloping the site of the former Emporium 
Building and adjacent warehouses and office buildings (the 
Project Site Area) as a multi-story, multi-use complex with 
rerouted portions of Jessie Street on either side of it (the 
Project). The proposed 1,607,000 gross square foot complex 
would comprise: 

• A shopping galleria (up to approximately 505,000 square 
feet), anchored by a new Bloomingdale's Department 
Store (an additional 375,000 square feet), for up to a total 
of approximately 880,000 square feet. 

• Entertainment, restaurant, and cinema space (up to 
approximately 115,000 square feet). 

• Office space (up to approximately 237,000 square feet). 

• A hotel tower comprising up to 465 hotel rooms (up to 
approximately 375,000 square feet). 

Construction of the Project is scheduled to take 28 months, 
commencing in December of 2000 for completion by March of 
2003. In addition to the construction of the proposed 
1,607,000 square foot complex described above, construction 
would involve: 

• Restoring historically significant portions of the former 
Emporium Building, which is considered to be a 
significant building under Objective 12 of the Downtown 
Plan Element of the General Plan. The proposed Project 
would preserve the following elements of the Emporium 
Building: its Market Street facade, much of the front 65 
feet of the building (which would require seismic 
upgrading), the dome, and the rotunda. The remainder 
of the Emporium Building and other existing structures 
in the Project Site Area would be demolished. 

• Constructing underground links to the Powell Street 
MUNI and BART station. 



1 Emporium Development, L.L.C. is a California limited liability company which is ultimately 
controlled by Forest City Enterprises, Inc., a publicly traded Ohio corporation with assets in excess of 
$3,500,000,000. 

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BUDGET ANALYST 

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Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



With regard to the hotel component of the Project, according 
to Mr. Jesse Smith of the City Attorney's Office, the 
Developer would be required to build a pad for the hotel 
above the Mission Street retail/entertainment portion of the 
complex, and to use its best efforts to cause the hotel to be 
built. According to Mr. Smith and Mr. Kevin Warner of the 
Redevelopment Agency, the Developer has the following four 
main options in order to satisfy a condition to closing the 
combined Owner Participation and Disposition and 
Development Agreement (OPA/DDA): 

(1) It could lease or sell the airspace to a separate hotel 
developer to construct the hotel (the most likely option) 2 . 
In this case, the Redevelopment Agency has the right to 
review the binding agreements between the Developer 
and the separate hotel developer for consistency with 
the OPA/DDA as a condition to closing. 

(2) The Developer's parent company, Forest City 
Enterprises, Inc., could establish its own hotel developer 
subsidiary company to construct the hotel. 

(3) The Developer could construct the hotel itself. 

(4) The least likely option is that no hotel could be 
constructed. The last three options would require the 
Redevelopment Agency's approval before the closing 
could occur. According to Mr. Smith, under the 
proposed CEQA findings and assorted expert economic 
analyses, a reduced development proposal which does 
not include a hotel is deemed financially infeasible. 
Furthermore, according to Mr. Smith, the Developer has 
a significant financial incentive to ensure that the hotel 
is built because, among other things, if it was not built, 
the net available Property Tax increment contribution 
from the Redevelopment Agency would be substantially 
reduced. 



2 According to Mr. Warner, it is estimated that the air space lease cost to a separate hotel developer 
would be either $1,125,000 per year during the Project's construction and $1,600,000 per year after 
the Project's opening, or a one-time sale price of at least $13,333,333 prior to the end of the 
development costs determination period (which would provide a minimum 12 percent to the 
Developer of approximately $1,600,000 per year). The development costs determination period is the 
period ending upon the earlier of (a) the first day of the first month after 95 percent of the mixed-use 
portion of the complex's space is leased and occupied, or (b) the end of the third year after the 
Project's opening. 

Board of Supervisors 
Budget Analyst 

33 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



The hotel could include up to 60 "interval ownership units" 
which are luxury suites with kitchen facilities. Fractional 
interests in these units would be sold in advance with 
occupancy rights for transient use over specific periods of 
time. According to Mr. Smith, the decision to develop such 
units would be a private matter between the Developer and 
the hotel developer, subject to the requirements of the Yerba 
Buena Center Redevelopment Plan and related plan 
documents (including the OPA/DDA). However, it is highly 
likely that such presold units would be built because they 
would provide the hotel developer with stable income. 
Furthermore, such units could be sold as residential 
condominium units if the criteria for parking, open space, 
and affordable housing specified in the proposed Yerba 
Buena Center Redevelopment Plan are met 3 . Approximately 
16,100 square feet of the Project would be publicly accessible 
open space both inside the complex and on its roof. If the 
Project incorporates residential condominium units, 
additional open space would be provided for the residents. 

Although the total parking requirement for the proposed 
Project has been estimated to be 1,330 spaces, no space has 
been set aside for parking. The proposal assumes that: 

• Based on economic analyses commissioned by the 
Developer (reviewed and determined to be reasonable and 
accurate by a real estate economic consulting firm, Keyser 
Marston Associates, on behalf of the City and the 
Redevelopment Agency), construction of underground 
parking would be economically infeasible. 

• The Project Site Area is located next to a public transit 
hub, and the City has a transit first policy. 

• The adjacent parking building at Fifth and Mission 
Streets has some spare capacity 4 and DPT is examining 



3 If such a conversion takes place, the Developer (or the hotel developer) is liable for all development 
fees and exactions which would apply if such residential condominium units had been built outside of 
the redevelopment area. According to Mr. Smith and Mr. Warner, if the Redevelopment Agency's 
standard 20 percent requirement for affordable housing would require a greater in lieu payment, or 
the development of more affordable housing, than would be required by the Planning Code's 
affordable housing requirements, then the Redevelopment Agency's requirement would govern. 

4 According to Mr. Ron Szeto of DPT, peak occupancy for the parking garage at Fifth and Mission 
Streets occurs around 1 pm. In July of 2000, 1 pm occupancy was an average of 75-85 percent on 
Sundays through Fridays, and an average of 95-98 percent on Saturdays. In January of 2000, 1 pm 
occupancy was an average of 65-85 percent. During major conventions at the Moscone Convention 
Center (approximately 20 to 25 days per year), the garage can provide up to 105 percent occupancy, 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

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Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

possible expansion of that garage and other ways to add 
parking capacity nearby. 

• Under the proposed mitigation monitoring program and 
the OPA/DDA, the Developer would be responsible for 
developing and implementing transportation initiatives 
for customers and employees. 

• According to the Transportation Authority, the real traffic 
congestion problem in the South of Market Area is 
freeway access, not availability of parking. 

The Budget Analyst notes that other current and projected 
downtown developments (including the Ferry Building 
renovation, the Pier 1 development, MUNI's hotel project at 
Mission and Steuart Streets, and the Moscone Convention 
Center expansion) also do not propose to construct new 
parking spaces in the downtown area. If the interval 
ownership units in the hotel are converted to residential 
condominium units, the Developer would be required to 
either: 

(a) Provide one parking space for every four residential 
condominium units if such parking spaces are located 
within 600 feet of the Project, or one parking space for 
every two residential condominium units if such parking 
spaces are located elsewhere in the South of Market 
Area; or, 

(b) Pay an in-lieu fee to the City in an amount equal to 
what it would cost the City to build the required number 
of parking spaces on City property, up to a cap of $8,333 
per unit for a maximum of 60 units ($500,000), based on 
the number of units the Developer or hotel developer 
elects to convert. 

Description of 
the Emporium 

Site Area: The approximately 6.77 acre Emporium Site Area comprises 

a number of land parcels: 

• The former Emporium Building at 835 Market Street and 
adjacent warehouses and office buildings presently owned 

due to the provision of a valet parking service. During these periods, DPT also coordinates with 
other garages in the area to maximize parking capacity. This information is consistent with the 
survey performed by transportation consultant Wilbur Smith for the Developer, according to Mr. 
Smith. 

board of supervisors 

Budget Analyst 

35 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



by Bloomingdale's, Inc. (Assessor's Block 3705, Lots 13, 
14, 15, 17, 18, 33, 38 and 43). 

• Buildings owned or held under option by the Developer 
(Assessor's Block 3705, Lots 9, 10 and 12). 

• A 15,420 square foot portion of the 33,023 square foot 
section of Jessie Street which runs east-west between 
Fourth Street and Fifth Street to be vacated and sold by 
the City, through the Redevelopment Agency, to the 
Developer for $3,100,000. 

• An approximately 100,000 square foot portion of Mission 
Street extending to the Mission Street wall of the parking 
garage at Fifth and Mission Streets. 

Of the Emporium Site Area's 6.77 acres, 4.48 acres form the 
Project Site Area on which the complex and the rerouted 
portions of Jessie Street would actually be built (Assessor's 
Block 3705, Lots 9, 10, 12, 13, 14, 15, 17, 18, 33, 38 and 43, 
and the subject portion of Jessie Street). 

Attachment I is a map of the various parcels of land which 
comprise the Emporium Site Area. Attachment II is a plan 
of the Project complex and the proposed configuration of 
Jessie Streets West and East immediately adjacent to the 
complex. Attachment III is a map showing the geographic 
relationship between the Emporium Site Area and the Yerba 
Buena Center Redevelopment Project Area. 

In FY 2000-01, all of the above parcels of land (including the 
current buildings) combined are assessed for Property Tax 
purposes at $69,957,924. 

An economic analysis performed by a private real estate 
economics consulting firm, the Sedway Group (for the 
Developer), and reviewed and determined to be reasonable 
and accurate by Keyser Marston Associates, Inc. (on behalf of 
the City and the Redevelopment Agency), found that the 
portion of the Emporium Site Area on which the Emporium 
Building and the Emporium Annex are located (Assessor's 
Block 3705, Lots 38 and 43) would have substantial value, 
perhaps $26,000,000 or mo^e, in their own right if the land 
were unencumbered by the requirement to restore the 
historic Emporium Building. However, the Sedway Group 
determined that Lots 38 and 43 have a negative value, even 
if all of the transferable development rights originally 

Board of Supervisors 

Budget Analyst 

36 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

associated with the site and potential historic tax credits are 
taken into account, because the cost of preserving and 
restoring the historic building exceeds the value of the 
renovated building. The Sedway Group concluded that there 
is no economic incentive for a property owner or developer to 
pursue another project on this site which involves 
rehabilitation of the Emporium Building. Therefore, 
although (a) the Emporium Site Area as a whole is assessed 
for Property Tax purposes at $69,957,924, and (b) two key 
parcels of land, Lots 38 and 43, would be worth $26,000,000 
or more in their own right if unencumbered by the 
requirement to preserve the Emporium Building, the 
preservation of the Emporium Building imposes a significant 
cost constraint on the Developer. 

On completion, the 4.48 acre (or 195,000 square foot) Project 
Site Area would be allocated to the following uses: 

• 182,190 square feet for the complex's "footprint." 

• 12,810 square feet for mid-block rerouting of Jessie Stret 
to Mission Street along both sides of the complex. 

According to DPW, the subject mid-block portion of Jessie 
Street is no longer needed for present or prospective public 
use, with the condition that a public utility easement be 
reserved for Pacific Gas and Electric gas and electric 
facilities and Pacific Bell telecommunications facilities, and 
that Jessie Street be rerouted to either side of the complex. 
To achieve the required street rerouting, the Developer, 
together with Bloomingdale's, Inc. where required (see 
"Ownership" below), would dedicate, construct, and convey to 
the City 12,810 square feet of land to permit the mid-block 
rerouting of Jessie Street to Mission Street along both sides 
of the Project. (This would involve the demolition of the 
existing buildings on this land.) Of this 12,810 square feet of 
land, the Developer would dedicate, construct, and convey to 
the City approximately 6,405 square feet, or one half, for a 
newly created street, "Jessie Street West", and an additional 
approximately 6,405 square feet, the other half, for a newly 
created street, "Jessie Street East." According to the 
Redevelopment Agency, the new Jessie Streets West and 
East would facilitate efficient and safe traffic circulation for 
vehicles and pedestrians to serve the Project, including a 15- 

board of Supervisors 
Budget Analyst 

37 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

bay truck loading and delivery area served from Jessie Street 
West. 

Ownership: Bloomingdale's, Inc., an Ohio corporation, owns most of the 

Project Site Area 5 . Bloomingdale's, Inc. has deemed the 
existing Emporium Building as unsuitable for a new 
Bloomingdale's department store because it does not meet 
modern retail standards. However, Bloomingdale's, Inc. 
considers the costs of building only a new department store 
building to be prohibitive given the requirement to preserve 
the historic features of the Emporium Building. Therefore, 
Bloomingdale's, Inc. wishes to be part of a larger 
development to enhance the patronage to its Bloomingdale's 
department store, while lowering its cost of occupying the 
space. Consequently, Bloomingdale's, Inc. has partnered 
with the Developer to create a mixed use complex. Upon the 
Developer's completion of (a) the shell and core of the 
department store, (b) the hotel pad, and (c) the mixed-use 
portion of the Project, Bloomingdale's, Inc. will convey all of 
the project site property to the Developer in exchange for a 
$30,000,000 shell build-out for, and fee ownership of, its 
Bloomingdale's department store. Effectively, the Developer 
would pay Bloomingdale's, Inc. $30,000,000 for (a) the land, 
and (b) its commitment to operate a Bloomingdale's 
department store as a major attraction for the retail portions 
of the mixed-use complex 6 . 

The Developer would be responsible for the costs associated 
with the termination of existing leases for property within 
the project site and any relocation assistance costs associated 
with existing business tenants. Certain existing office and 
retail uses would be provided with relocation benefits to the 
extent they are eligible under the Yerba Buena Center 



5 Bloomingdale's, Inc. owns most of the Project Site Area except (a) Assessor's Block 3705, Lot 9, 
which is owned by the Developer, (b) Assessor's Block 3705, Lots 10 and 12, which are under option 
to the Developer, and (c) the subject portion of Jessie Street. 

6 The structure of the proposed transaction is laid out m Recitals H and I of the draft OPA/DDA. 
The Developer anticipates, firstly, acquiring fee title to Lots 10 and 12 and to the subject portion of 
Jessie Street, and then conveying fee title to all of its holdings to Bloomingdale's, Inc. 
Bloomingdale's, Inc. would then ground lease the entire project site to the Developer during the 
Project's construction. Upon completion, Bloomingdale's, Inc. would convey fee title to the project 
site (excluding the department store parcel) to the Developer, thereby terminating the ground lease. 
Under a separate agreement, Bloomingdale's, Inc. and the Developer would enter into a Reciprocal 
Easement Agreement which is anticipated to include an operating convenant for Bloomingdale's, Inc. 
to complete the build-out of, open, and operate a Bloomindale's department store. 

board of supervisors 
Budget Analyst 

38 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Redevelopment Plan or State redevelopment law. They could 
be relocated either within or outside the Project. There are 
no existing residential uses. 

Funding 

Arrangements: According to Mr. William Carney of the Redevelopment 

Agency, the Project is expected to increase the value of the 
Emporium Site Area by $516,210,742 7 , from its current 
assessed valuation (for Property Tax purposes) of 
$69,957,924 to $586,168,666. This projected increase in 
assessed valuation would result from improvements funded 
by a combination of: 

• Private investment (see "Ownership" above); and 

• Redevelopment Agency contributions of Property Tax 
increment funding up to a maximum amount of 
$27,000,000 (see Comments No. 4 through 10 below). The 
maximum amount of $27,000,000 represents the net 
present value 8 as of the Project's opening. 

Based on the projected increased valuation of $516,210,742 
once the Project has been completed and the FY 2000-01 
Property Tax rate of $1,136 per $100 of assessed valuation, 
increased Property Tax revenue from the completed Project 
would total $5,864,154 annually. The size of the annual 
Property Tax increment contributions made by the 
Redevelopment Agency (funded by the incremental Property 
Tax revenues being generated as the Project is constructed) 
would be reduced if there was better than expected 
performance against net sales proceeds or net refinancing 
proceeds benchmarks (i.e. when net sales or refinancing 
proceeds exceed development costs less $25,000,000 9 ). 



7 This amount of $516,210,742 comprises: 

• A projected $447,984,612 on the secured roll (i.e. taxable real property) consisting in rounded 
figures of (a) $46,000,000 for the Bloomingdale's department store shell, core, and fit-out, (b) 
$57,000,000 for the hotel, (c) $113,000,000 for 60 interval ownership units, and (d) $232,000,000 
for other retail, entertainment, and office spaces. 

• A projected $68,226,130 on the unsecured roll consisting of tenant improvements for 
Bloomingdale's department store, and for the Project's retail, entertainment, and office space, 
based on an assumed square foot value for tenant improvements prepared by the Sedway Group 
and applied to the amount of new development. 

8 The subject proposal uses a net present value of future dollars based on a 7.5 percent annual 
discount rate. 

9 According to Mr. Smith and Mr. Warner, the amount of $25,000,000 means that at the time the 
Property Tax increment contributions could stop and the City's participation in Project revenues 

Board of Supervisors 

Budget Analyst 

39 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

In return for the Redevelopment Agency's Property Tax 
increment contributions, the City would participate in future 
net cash flow, net refinancing proceeds, and net sales 
proceeds from the Project (see Comments No. 11 through 14 
below). 

A 12 percent rate of return has been negotiated as a return 
on cost for the Developer and as a return on the 
Redevelopment Agency's investment of Property Tax 
increment assistance for the City. According to Mr. Warner, 
a 12 percent rate of return on cost for investors is reasonable 
in the current real estate development market. The 
Redevelopment Agency, the Mayor's Office of Economic 
Development, and independent real estate economics 
consultants reviewed mixed-use projects in large 
metropolitan areas and determined a range of returns on 
developers' costs from 10.5 percent to 13 percent, depending 
on the projects' varying components and market risk factors. 
Based on this analysis, a 12 percent annual return based on 
the one-time total cost of the Project was assessed as a 
reasonable rate of return given the risks to the Developer of 
the subject Project. 

According to Mr. Warner, the 12 percent rate of return would 
be a simple, rather than compound, rate of return on the net 
operating income 10 . If the Developer achieved a higher than 
12 percent rate of return on costs, there could be two 
benefits: (a) the Developer could require less Property Tax 
increment contributions from the Redevelopment Agency 
because the increment cutoff, based on the Developer's 
recovery of actual development costs less $25,000,000 from 
sales and refinancings, could be triggered (see Comment No. 
8), and (b) the City's participation in the Project revenues 
could begin early because the Developer could achieve the 

could begin, the Developer would not be entitled to recover all of its costs and would be required to 
retain significant equity in the Project for as long as the City has money in the Project (in the form of 
Property Tax increment which has not yet been repaid). 

10 Net operating income is defined as all gross revenues received by the Developer from the Project, 
less (a) operating expenses for each Developer fiscal year, and (b) the amount of the Capital 
Expenditures Reserve for each Developer fiscal year. It excludes any development cost item and 
there is no deduction for debt service. According to Mr. Smith and Mr. Warner, debt service is not 
deducted from gross revenues for the purpose of determining the net operating income and, 
therefore, the risk for debt service is solely carried by the Developer, to the City's benefit in the 
payment of participation. 

board of supervisors 
Budget Analyst 

40 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

net increase of net sales proceeds benchmarks before the 18 th 
anniversary date of the Project opening (see Comment No. 
12). Mr. Warner states that the City's participation would 
similarly be based on a 12 percent (simple interest) rate of 
return on the Redevelopment Agency's investment in the 
Project. 

Project Approvals: The required Project approvals fall into the following four 
categories: 

(1) Entitlements: these include (a) adopting related CEQA 
findings, mitigation measures, statement of overriding 
considerations, and mitigation monitoring program (File 
00-1265 which will also be considered at the 
Transportation and Land Use Committee's August 22, 
2000 meeting), (b) amending the Yerba Buena Center 
Redevelopment Plan (File 00-1257 which has been 
referred directly to the Board of Supervisors for a public 
hearing on September 18, 2000), (c) amending the City's 
General Plan and Zoning Map so that they are 
congruent with the Yerba Buena Center Redevelopment 
Plan Amendment (Files 00-1256 and 00-1258 to be 
considered at the Transportation and Land Use 
Committee's August 22, 2000 meeting), and (d) 
approving Jessie Street and Mission Street sidewalk 
widths, and parking and traffic regulations (Files 00- 
1259, 00-1311, and 00-1434 to be considered at the 
Transportation and Land Use Committee's August 22, 
2000 meeting). 

(2) Agreements for Development of the Project: these 
include approving (a) the OPA/DDA between the 
Redevelopment Agency and the Developer, and (b) an 
Owner Participation Agreement between the 
Redevelopment Agency and Bloomingdale's, Inc. 
According to Mr. Smith, neither the OPA/DDA, nor the 
Owner Participation Agreement between the 
Redevelopment Agency and Bloomingdale's, Inc. (which 
has yet to be finalized) require Board of Supervisors 
approval. However, Redevelopment Agency approval of 
these agreements is conditional upon the Board of 
Supervisors adopting the Yerba Buena Center 
Redevelopment Plan Amendment. 

(3) Financing: this includes the subject resolution 
approving the use of Property Tax increment under a 

Board of Supervisors 
Budget Analyst 

41 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Tax Allocation Agreement between the City and the 
Redevelopment Agency and a Financing Agreement 
between the City, the Redevelopment Agency, and the 
Developer. 
(4) Site Assembly: this includes approving (a) the vacation 
of a portion of Jessie Street (having adopted the 
Resolution of Intent under File 99-2235, the Board of 
Supervisors has scheduled a public hearing for 
September 18, 2000), and (b) a Sale and Exchange 
Agreement for the conveyance by the City of the vacated 
street area and the conveyance by the Developer of 
areas for the rerouting of Jessie Street (File 00-1266 to 
be considered at the Transportation and Land Use 
Committee's August 22, 2000 meeting). 

Comments: Yerba Buena Center Redevelopment Plan 

1. According to Mr. Carney, the Redevelopment Agency is 
seeking to make the Project an approximately 6.77 acre 
extension to the existing 87 acre Yerba Buena Center 
Redevelopment Project Area. The purpose of the Yerba 
Buena Center Redevelopment Plan is to revitalize a 
substantial portion of the South of Market Area by creating a 
mixed-use civic center with cultural institutions, hotels, 
retail locations, affordable housing, and the Moscone 
Convention Center. The Project is deemed to be an 
appropriate extension of the Yerba Buena Center 
Redevelopment Area because it provides a major retail, 
entertainment, and hotel center in close proximity to the 
Yerba Buena Gardens and Moscone Convention Center, and 
enhances the pedestrian and public transit connections 
between those locations and Market Street. 

2. Adding the Project to the Yerba Buena Center 
Redevelopment Project Area would provide the 
Redevelopment Agency with the necessary legal and 
financial ability to contribute Property Tax increment 
funding to the Project in order to alleviate the economic and 
physical blight of the Emporium Site Area, according to Mr. 
Carney. Furthermore, the proposed Yerba Buena Center 
Redevelopment Plan Amendment would modify some of the 
building height and size constraints of the City's Planning 
Code. Attachment IV is a memorandum provided by Mr. 
Carney which specifies the Planning Code modifications in 

Board of Supervisors 
Budget Analyst 
42 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



the proposed Amendment. The proposal to amend the Yerba 
Buena Center Redevelopment Plan is subject to pending 
legislation which, in accordance with the requirements of 
State redevelopment law, has been sent directly to the Board 
of Supervisors for consideration after a public hearing (File 
00-1257 to be heard by the full Board of Supervisors on 
September 18, 2000). 

3. According to File 00-1256 (an ordinance amending the 
San Francisco General Plan to be considered at the 
Transportation and Land Use Committee's August 22, 2000 
meeting), any property to be included in the Emporium Site 
Area would be necessary for the effective redevelopment of 
that area, and would not be included purely for the purpose 
of enlarging the area eligible for obtaining Property Tax 
increment contributions from the Redevelopment Agency, 
and thereby increasing such contributions. 

Property Tax Increment Contribution 

4. According to Keyser Marston Associates, Inc. and the 
Sedway Group, despite the currently strong San Francisco 
real estate market, none of the six development plans 
proposed for the Emporium Site Area would be economically 
feasible without a public subsidy because of what they term 
the "extraordinary costs" associated with retaining and 
restoring several historic portions of the Emporium Building, 
site assembly, relocation of utilities, and construction of new 
streets. (Attachment V, provided by Mr. Carne3% 
summarizes the six alternative scenarios.) For a developer to 
achieve an annual 12 percent rate of return on the cost of 
developing the Emporium Site Area, both real estate 
economics consultants have identified a "feasibility gap" of 
$32,800,000, a funding shortfall which they believe would 
require public funding. The amount of $32,800,000 
represents (a) approximately 6.4 percent of the total Project's 
incremental value of $516,210,742, or (b) approximately 10.9 
percent of the Developer's capped development costs of 
$300,000,000 n . However, according to Mr. Smith and Mr. 



11 Capped development costs are defined as the lesser of (a) actual development costs, or (b) 
$300,000,000 less a maximum of $15,000,000 for the gross sales proceeds from the hotel parcel 
(minus reasonable closing costs, brokerage fees, and prepayment penalties) if the hotel parcel is sold 
before the end of the development costs determination period (which is upon the earlier of either 95 
percent occupancy or the end of the third year after opening). The $300,000,000 maximum capped 

Board of Supervisors 
Budget Analyst 

43 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Warner, $32,500,000 represents a much more significant gap 
in relation to the Developer's projected cash equity in the 
Project of approximately $55,000,000. 

5. In response to the identified "feasibility gap" of 
$32,800,000, the Redevelopment Agency proposes to 
contribute Property Tax increment funds up to the amount of 
$27,000,000 (in net present value as of the date the Project 
opens) to reimburse the Developer for expenditures to 
alleviate blight and provide public benefits such as: 

(1) The historic preservation costs associated with the 
Project. These are estimated to cost $21,333,000 12 . 
Attachment VI provided by Mr. Carney, summarizes the 
estimated historic preservation costs. 

(2) Site assembly and preparation (which includes 
$3,100,000 to purchase the subject portion of Jessie 
Street). 

(3) Transit and circulation improvements. 

(4) Economic revitalization and job creation. 

According to Mr. Smith and Mr. Warner, although these 
types of eligible expenditures for which Property Tax 
increment must be allocated are specified in an attachment 
to the Financing Agreement, the exact cost items on which 
the $27,000,000 Property Tax increment funding would be 
expended have not yet been determined. They note, 
however, that the Developer would be required to report on 
what eligible costs it expends for the Property Tax increment 
contributions it receives. 

6. The $27,000,000 Property Tax increment contribution 
(net present value at the Project's opening) is a figure which 

development cost does not include the Bloomingdale's department store build-out and the 
construction of the hotel above the pad, and it could be decreased if the overall scope of the Project is 
reduced. According to Mr. Smith, capping development costs protects the City against cost overruns 
delaying the commencement of the City's participation term. It also limits the total amount of 
interest on the Developer's equity during construction which counts towards development costs. 
Lowering development costs could benefit the City in two possible ways: (1) it could accelerate 
reaching the financial benchmark for the early cessation of Property Tax increment, and (2) it could 
accelerate reaching the financial benchmark for the early commencement of participation in Project 
revenues. 

12 According to the Sedway Group, the cost and construction risk of retaining these historic elements 
and selectively demolishing the rest of the structure is much greater than demolishing the entire 
building and building on a clear site. 

Board of Supervisors 
Budget Analyst 

44 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



results from negotiations between tbe City and the Developer 
over the value of the entire feasibility gap. The $5,800,000 
gap (approximately 1.9 percent of the Developer's capped 
development costs of $300,000,000) between the 
Redevelopment Agency's maximum Property Tax increment 
contribution of $27,000,000 (9 percent of capped development 
costs) and the estimated $32,800,000 "feasibility gap" 
(approximately 10.9 percent of capped development costs) 
would be closed by the Developer through one or more of the 
following mechanisms: reducing project costs through value 
engineering, increasing rental revenues, finding other 
funding sources, or by accepting a lower rate of return. 
While the $27,000,000 Property Tax increment contribution 
is only 9 percent of the capped development costs of 
$300,000,000, it represents a more significant contribution to 
Project development costs given that the Developer is 
expected to contribute equity in the amount of $55,000,000 
up -front. 

7. The Redevelopment Agency justifies the proposed 
Property Tax increment contribution of $27,000,000 in net 
present value as of the date the Project opens, or 
approximately 5.2 percent of the Project's projected increased 
value of $516,210,742, on the grounds that the Project would 
generate the following public benefits: 

• The Project would revitalize the area of mid-Market and 
Mission Streets. 

• The Project would retain, restore, or adaptively reuse 
significant historic features of the Emporium Building. 

• The Project would create an estimated 2,300 direct 
permanent, full time equivalent jobs 13 and an estimated 
1,100 construction jobs during the construction period 14 . 
The Developer would commit to targets for (a) the 
employment of economically disadvantaged individuals, 
South of Market Area residents, and San Francisco 
residents, and (b) tenant leases with minority and 
women-owned businesses. 



13 Calculated by Keyser Marston Associates, for the City and the Redevelopment Agency. 

14 Also calculated by Keyser Marston Associates, which estimates that, in addition to direct jobs, the 
Project would generate in San Francisco an approximate 4,400 indirect permanent jobs, and 1,200 
indirect construction jobs, as a result of the Project's economic "spin-off." 

Board of Supervisors 
Budget Analyst 

45 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



The Developer would pay $800,000 into the City's First 
Source Hiring Program 15 . The Developer and other 
employers involved in the Project would be required to 
adhere to the City's First Source Hiring Ordinance and 
hire qualified economically disadvantaged individuals 
into entry level jobs. 

The Developer would pay $250,000 for special 
improvements to, or the operation of, Hallidie Plaza 16 . 
The Developer would pay $1,500,000 for parking 
improvements in the South of Market Area or other 
parking solutions determined by the City (this 
expenditure would be separate from the parking 
expenditures described above which relate to the 
construction of residential condominium units). 
The Developer would implement a number of measures to 
encourage the use of public transportation by employees 
and customers. 

The Developer would spend at least $1,000,000 on Powell 
Street MUNI and BART station improvements, and at 
least $250,000 on off-site mitigation measures identified 
in the Environmental Impact Report for the Project. 
The Project would generate a projected $14,000,000 per 
year in new tax revenues for the City from the third year 
after the complex's opening (beginning in Year 2006) 17 . 
The Project would contribute at least $16,000,000 in 
today's dollars to affordable housing over 30 years, which 
doubles the affordable housing fee which would otherwise 
be payable under the Planning Code. This would be paid 
on the basis of 20 percent of the Property Tax increment 
for the first 16 years from the effective date of the Board 
of Supervisors ordinance approving the Verba Buena 
Center Redevelopment Plan Amendment (File 00-1257) 



15 The City's First Source Hiring Program is a job training and job referral program for economically 
disadvantaged San Francisco residents seeking entry-level jobs. In terms of the subject Project, it is 
anticipated that the Redevelopment Agency would administer the program for construction jobs, 
while the City would administer the program for permanent jobs. The Developer would designate 
and fund a liaison person to work with the Redevelopment Agency and the City to implement the 
First Source Hiring Program within the Project, in part by informing tenants of their obligation to 
advise the City about available entry-level jobs. 

16 This amount is approximately the same as would be payable if the Project site street frontages 
were part of the Union Square Business Improvement District. 

17 Keyser Marston Associates estimates $6,000,000 per year to the General Fund and $8,000,000 per 
year to other City funds (dedicated MUNI and DPW revenues, hotel tax funds, and child care fees). 
These estimates consist of total projected tax revenues (including all Property Tax increment) less 
the City's projected costs of providing additional services. 

board of supervisors 
Budget analyst 

46 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



and 40 percent for years 17 to 30. The Project would also 
contribute a child care fee of $1 per square foot of new- 
hotel and office space, for an estimated total contribution 
of $398,000. According to the Planning Department, 
additional fees would also be payable for open space (an 
estimated $46,000) and for transit impact (an estimated 
$115,000). 
• An annual $200,000 payment would be made to the City 
(indexed for inflation through annual adjustments based 
on changes in the Consumer Price Index) for the first 15 
years of the Project, or a one-time in-lieu payment of 
$2,250,000, if the Developer allocates hotel rooms as 
interval ownership units. These payments are a 
negotiated amount which would be in lieu of possible lost 
Hotel Tax revenues should such hotel units be converted 
to interval ownership units. 

8. The Redevelopment Agency's Property Tax increment 
contribution would not exceed a cap of $27,000,000 in net 
present value as of the date of the Project's opening and 
would not continue beyond the earlier of (a) 13 years after 
the Project opens, (b) 16 years after the effective date of the 
ordinance adopting the Yerba Buena Center Redevelopment 
Plan Amendment (File 00-1257) 18 , or (c) the year in which 
the Developer receives net proceeds from refinancing or sale 
in an amount equal to, or greater than, actual development 
costs less $25,000,000. 

In any year, the Redevelopment Agency's annual maximum 
Property Tax increment contribution to the Developer would 
not exceed 60 percent of the total Property Tax increment 
revenues generated within the Emporium Site Area that 
year. The Redevelopment Agency would pay the Property 
Tax increment contributions to the Developer on a "pay-as- 
you-go" basis, once annually, from the first year in which 
construction of the Project produces incremental assessed 
value 19 . No Property Tax increment revenues would be 



18 According to Mr. Smith, the 16 year period caps the risk to the Redevelopment Agency of a longer 
than anticipated construction period. This is subject to a possible maximum three year extension if 
there is major damage to the Project (outside the Developer's control) which reduces the annual net 
available Property Tax increment to the Redevelopment Agency by 10 percent or more. 

19 The Agency, subject to Board of Supervisors approval, would have the option to issue Tax 
Allocation Bonds and pay the Developer the Increment Liquidation Amount in lieu of pay-as-you-go 
increments, if that would be financially advantageous for the Redevelopment Agency. The 

Board of Supervisors 
Budget Analyst 

47 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

available beyond the Property Tax increment generated by 
the Project itself. The Redevelopment Agency's annual 
Property Tax increment contribution could equal the total 
increment collected on the assessed value of taxable Project 
property, less: 

• The affordable housing set-aside. 

• An approximately 20 percent statutory pass-through 
required under redevelopment law for payments to 
funding agencies (including the City, the San Francisco 
Unified School District, and BART). 

• Up to 2 percent annual growth in the Property Tax base 
to adjust for inflation. 

• An annual fee to the Redevelopment Agency of $65,000 
for the first three years in which the Developer receives 
Property Tax increment, then $50,000 annually for the 
next four years, and then $35,000 annually until the end 
of the Property Tax increment contribution period (all 
amounts indexed for up to 3 percent annual inflation). 
These payments are intended to compensate the 
Redevelopment Agency for the costs of overseeing the 
Project. 

9. According to the estimates prepared by the Sedway Group 
for six alternative development scenarios for the Emporium 
Site Area (as described in Attachment V), this preferred 
development plan requires the least public subsidy and 
provides the most public benefits. However, the other five 
alternative scenarios would preserve more of the historic 
Emporium Building and would conform more closely with 



Increment Liquidation Amount would be (a) the amount of any prepayment penalty, plus 97 percent 
of the difference between (a) $27,000,000 plus 7.5 percent annual interest, and (b) the Property Tax 
increment and interest contributed thus far. However, according to Mr. Smith, pay-as-you-go 
Property Tax increment contributions are preferable to tax allocation bonds. Tax allocation bonds 
are based on projected tax increment payments and are, therefore, at risk of reassessment or 
decreased tax revenues due to damage to the Project, and place more risk directly on the Developer 
(although pay-as-you-go makes it more difficult for the Developer to finance those proceeds). 
Conversely, the size of pay-as-you-go Property Tax increment contributions is determined by the 
Property Tax increment actually generated. Furthermore, tax allocation bonds would be more 
expensive because (a) the Verba Buena Center Redevelopment Area has a shorter term which ceases 
between 2008 and 2010, thereby reducing the length of time available to amortize the bonds in the 
absence of a term extension or credit enhancement, (b) the Redevelopment Agency would have to pay 
transaction costs associated with issuing the bonds, and (c) the City and the Redevelopment Agency 
would need to safeguard against potential default on the bonds (such as obtaining a guarantee for 
shortfalls in tax increment funds to pay debt service costs). 

board of supervisors 
Budget Analyst 

48 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

existing Planning Code requirements. Mr. Tony Irons, the 
City Architect, has reviewed the construction cost estimates 
of the six Project alternatives and has deemed them 
reasonable, although he has not independently verified each 
component of the cost estimates. 

10. The Budget Analyst has received extensive economic 
analysis related to the Developer's need for the 
Redevelopment Agency's proposed Property Tax increment 
contribution of up to $27,000,000 to ensure the viability of 
the proposed project. However, none of the six development 
scenarios for which economic analyses were prepared (as 
listed in Appendix V) contain information on Bloomingdale's, 
Inc.'s future plans for this valuable, centrally located site if 
the proposed Project did not proceed with the assistance of 
the Redevelopment Agency's Property Tax increment 
contribution. 

While Federated Department Stores, Inc. has asserted that 
"the cost to bring to modern department store standards the 
historic, unreinforced masonry building, with its closely 
spaced columns and other challenges, is simply prohibitive" 
(refer to the letter contained in Attachment VII), the Budget 
Analyst cannot independently verify what Bloomingdale's, 
Inc. would do if the Project did not proceed. Therefore, the 
Budget Analyst is unable to determine the extent to which 
the asserted need for the Redevelopment Agency's proposed 
contributions of $27,000,000 in Property Tax increment to 
the Developer is necessary for the development of the 
property. 

City Participation in Project Revenues 

11. Under the proposed Project, in return for the City's 
Property Tax increment contribution, the City would 
participate in net cash flow, net refinancing proceeds, and 
net sales proceeds from the Project. The participation 
revenues, which would all go to the City's General Fund 20 , 
would be generated on the following basis: 



20 Under the Tax Allocation Agreement, the Redevelopment Agency irrevocably assigns participation 
payments to the City. 

Board of Supervisors 
Budget Analyst 

49 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

• City participation in net cash flow is 35 percent of net 
operating income after the Developer recovers (a) for any 
participation payable in years 1 to 19 after the Project's 
opening, its 12 percent annual return on capped 
development costs plus accumulated net operating income 
shortfalls (and 12 percent interest on such shortfalls), and 
(b) for any participation payable in years 19 onwards, its 
annual 12 percent simple interest return on capped 
development costs. 

• City participation in refinancings would be 35 percent of 
the Developer's net proceeds from a refinancing. 

• City participation in sales would be 35 percent of the net 
proceeds from a sale. 

Selling the hotel parcel would represent one-time 
participation for the City if it happens after the end of the 
development costs determination period. If it occurs before 
the end of that period, it would reduce the development costs 
but there would be no participation in the sale of the hotel 
parcel. According to Mr. Warner, if the hotel pad is sold for 
up to $15,000,000, both the Developer's actual development 
costs 21 and the capped development costs would be reduced 
accordingly to the benefit of both the Developer (in terms of 
overall Project financing) and the City (due to the potential 
increased likelihood that the Developer would reach the 
financial benchmark for the early cut-off of Property Tax 
increment). If the hotel parcel sale's proceeds exceed 
$15,000,000, those proceeds above $15,000,000 reduce only 
the Developer's actual development costs, not the capped 
development costs because of a negotiated $15,000,000 cap 
for hotel parcel sales proceeds. However, the City again 
benefits in that reduced actual development costs accelerate 
the City's participation in Project revenues. 

12. The City's participation would begin on the earliest of: 

• The year in which both (a) the Project's net operating 
income, exclusive of the City's Property Tax increment 



21 Actual development costs are defined as (a) the Developer's expenditures on development of the 
Project, and (b) 12 percent interest on the Developer's equity during the construction period. 
Development costs would be reduced by (a) the amount of Property Tax increment rebated to the 
Developer during construction, (b) any Project revenues received by the Developer during 
construction, and (c) the total net proceeds from a sale of the hotel parcel if it is sold before the end of 
the development costs determination period. 

Board of Supervisors 

Budget Analyst 

50 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



contribution, is equal to or greater than an annual 12 
percent return on capped development costs, and (b) the 
balance of accumulated net operating income shortfalls 
(and annual 12 percent interest on such shortfalls) is zero. 

• The year in which the Developer receives net sale 
proceeds less $25,000,000. 

• The 18 th anniversary date of the Project opening 
(projected to be approximately 2021 based on a Project 
opening of 2003). 

Subject to the ongoing negotiations with labor union 
representatives, the Developer could be obligated to prepay 
$1,000,000 of the City's participation revenue in accordance 
with provisions relating to Bloomingdale's department store 
labor relations. According to Mr. Smith, such prepayment 
would be applied to the last participation dollars otherwise 
payable to the City. 

13. The City's participation would be (a) capped at the total 
amount of Property Tax increment it had contributed, plus 
12 percent simple interest on that total contribution, and (b) 
limited to a maximum term of 99 years. The Developer 
would have the right to buy out or prepay some or all of the 
City's participation at any time. Mr. Smith notes that the 
99-year maximum term would cover a number of economic 
cycles, thereby protecting the City's participation against 
short-term economic downturns. Projections, however, 
estimate that full repayment of the City's Property Tax 
increment investment plus required interest would take 33 
years. According to Mr. Smith, the City's participation rights 
are associated with the mixed-use portion of the Project, and 
would continue even if some or all of the mixed-use portion of 
the Project was sold or transferred to other owners. 

14. Projections prepared by the Sedway Group for the 
Developer, and reviewed by Keyser Marston Associates on 
behalf of the City and the Redevelopment Agency, indicate 
that the City would be able to recoup fully its investment of 
Property Tax increment, plus an annual 12 percent simple 
interest return on its total investment, from the Project's 
cash flow and net refinancing proceeds. The City is 
estimated to receive (a) all of the principal amount of its 
Property Tax increment contribution (which would have been 
up to $27,000,000 in net present value as of the Project's 

Board of Supervisors 
budget Analyst 

51 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



opening) back from Project revenues within the first 24 years 
after the Project opens, and (b) the annual 12 percent simple 
interest return on its total Property Tax increment 
contribution between years 25 and 33 after the Project opens. 

Attachment VIII is a spreadsheet prepared by the Sedway 
Group summarizing the chronological breakdown of: 

• The Redevelopment Agency's estimated cumulative 
Property Tax increment contributions in the amount of 
$40,747,639 between Years 1 and 12, which has a net 
present value of $27,000,000 using an annual discount 
rate of 7.5 percent, discounted to the Project's opening. 

• The City's subsequent participation in net revenue in the 
amount of $42,741,661 between Years 19 and 24 
(assuming a sale or refinancing in the amount of 
$17,060,937 in Year 23) by which time the City is 
projected to be repaid an amount equivalent to the 
Redevelopment Agency's Property Tax increment 
contribution of $27,000,000 (net present value as of the 
Project's opening). 

• The City's subsequent participation in net revenue in the 
amounts of $76,578,791 between Years 25 and 33 by 
which time the City is projected to be paid a 12 percent 
simple interest return on the Redevelopment Agency's 
total Property Tax increment contribution of $27,000,000 
(net present value as of the Project's opening). 

Based on the assumed net revenue to be derived from the 
Project, and the projected 7.5 percent discount rate, the 
participation outlined in Attachment VTII equates to 
$27,000,000, plus 12 percent simple interest. According to 
Mr. Smith, the Sedway Group projections were reviewed and 
determined to be reasonable and accurate by Keyser Marston 
Associates, on behalf of the City and the Redevelopment 
Agency. 

Key Risks to the City 

15. According to Mr. Smith, the key risks to the City of 
proceeding with the proposed Project would be: 

• The proposed construction is either not completed or not 
opened, and therefore blight in the Emporium Site Area is 

Board of Supervisors 
Budget Analyst 

52 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



not alleviated and the public benefits from the Project 
(including jobs and tax revenues) are not realized. 

• The subject portion of Jessie Street is vacated and 
conveyed to the Developer but the complex is not built. 

• The Redevelopment Agency's contribution of $27,000,000 
in Property Tax increment is more than the Project 
requires to be economically feasible due to, for example, 
better than expected Project revenues, lower than 
expected development costs, or higher than expected 
refinancing or sale proceeds. 

• Post-completion market conditions prevent the projected 
revenues to both the Developer and the City from being 
generated, thereby providing the City with neither the 
projected return on the Redevelopment Agency's 
investment of Property Tax increment, nor the projected 
public benefits (such as tax revenues, jobs, and economic 
revitalization). 

• The hotel is not built thereby reducing the number of jobs, 
the revenue, and the tax increment generated by the 
Project. 

• There is a disaster due to earthquake, fire, or some other 
catastrophic event which diminishes or delays the City's 
participation in Project revenues. 

With regard to the proposed Project not proceeding, Mr. 
Smith states that the key risks to the City would be that 
Bloomingdale's, Inc. keeps the Emporium Building vacant, 
that no development occurs, and that, therefore, the City 
does not receive the public benefits which would accrue from 
the proposed Project (as outlined in Comment No. 7 above). 

16. Mr. Smith advises that the proposed development 
contains the following provisions which would mitigate these 
risks: 

• There is the inherent financial risk to the Developer (and 
its parent company, Forest City Enterprises, Inc.), 
Bloomingdale's, Inc., and the construction lender of not 
completing the Project because the Developer, 
Bloomingdale's, Inc., and the construction lender would be 
committing significantly more private dollars than the 
Redevelopment Agency would be contributing to the 
Developer in Property Tax increment. 

board of Supervisors 

Budget Analyst 

53 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

• The subject portion of Jessie Street could not be conveyed, 
and escrow could not close, until the Developer has 
finalized its project financing, obtained the required 
permits, and met a number of other conditions to closing 
under the OPA/DDA 22 . 

• Even if the subject portion of Jessie Street was conveyed 
but the complex was not built, the City would have 
received the $3,100,000 payment (the November of 1999 
appraised value of the property) and bonds or other 
security procured by the Developer to finance completion 
of the new Jessie Streets West and East, and an 
irrevocable offer to dedicate and convey fee title for the 
new street areas to the City. 

• The City would have contributed only a projected 
$1,977,027 in Property Tax increment by the end of the 
28 month construction period (based on a fully completed 
Project). The City could seek to have the Redevelopment 
Agency require repayment under any new or amended 
Owner Participation Agreement for which new 
consideration is required if alternative development 
proposals were to be constructed instead. 

• The following provisions in the Financing Agreement 
would mitigate against the risk of the Redevelopment 
Agency contributing more Property Tax increment than 
the Project needs to be economically feasible: (a) Property 



22 According to Mr. Smith, the vacation of the subject portion of Jessie Street would not become 
effective until the Yerba Buena Center Redevelopment Plan Amendment and the General Plan 
Amendment ordinances take effect, and the Developer (together with Bloomingdale's, Inc. where 
required) has: (a) irrevocably dedicated the property for Jessie Streets West and East to the City; (b) 
agreed to construct the new Jessie Streets West and East, including required public utilities, 
pursuant to a street improvement agreement and permit; (c) furnished bonds or other security 
acceptable to the City to guarantee completion of the new street areas; and (d) ensured that the City 
has interim easements to maintain access to public utilities located in the subject portion of Jessie 
Street, and pedestrian and vehicular access to adjacent properties until Jessie Streets West and East 
are constructed. 

The City proposes to sell and convey the subject portion of Jessie Street to the Redevelopment 
Agency for immediate sale and reconveyancing to the Developer. In turn, the Developer would (a) 
pay $3,100,000 directly to the City through escrow, and (b) dedicate, construct, and convey fee title to 
the City for Jessie Streets West and East. Therefore, according to Mr. Smith, the sale and 
conveyancing process is being held in two stages through a "simultaneous" escrow which ensures 
that the property is not conveyed to the Developer until cJl of the conditions for the commencement 
of the Project are satisfied. Mr. Smith states that this allows the Redevelopment Agency to serve as 
a clearinghouse for all of the closing conditions and helps protect the City's interest by ensuring that 
conveyance does not occur until the Developer is ready to begin construction. Neither the City nor 
the Redevelopment Agency would pay the transfer taxes and closing costs associated with the 
conveyance. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 
54 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Tax increment contributions could only commence after 
construction actually begins, (b) Property Tax increment 
contributions could be terminated early based on better 
tban expected performance against refinancing proceeds 
or net sale proceeds benchmarks, and (c) the City's 
participation in Project revenues could begin early if the 
Project meets cash flow or net sale proceeds benchmarks 
earlier than expected. 

• If construction takes longer than 28 months (subject to 
force majeure 23 ), the Redevelopment Agency could require 
specific performance measures, as permitted under the 
OPA/DDA. 

• In the event of a disaster, the Developer would be obliged 
to restore up to the extent of insurance coverage 24 . 

• The maximum 99-year participation term would give the 
City time to fully recover its Property Tax increment 
contributions, plus annual 12 percent simple interest, 
even if there was damage to the complex or a market 
downturn. 

• The parent company, Forest City Enterprises, Inc., would 
provide the City with a completion guarantee so that it 
would complete the construction of the complex if the 
Developer fails to do so, subject to Forest City 
Enterprises, Inc. being able to obtain the necessary 
financing. If Forest City Enterprises, Inc., despite using 
its best efforts, cannot obtain financing, it could terminate 
its obligations to complete so long as it pays back the 
Property Tax contribution it has received from the 
Redevelopment Agency, the annual 12 percent simple 
interest on the total contribution, plus a termination fee 
of $1,000,000 if the Project is less than 50 percent 
completed. According to Mr. Smith, this guarantee is a 
condition of the close of escrow under the OPA/DDA. 

• The Developer has a financial incentive to have the hotel 
built (as outlined in "Description of the Project" above). 

• A Financing Agreement covenant obligates the Developer 
to use commercially reasonable efforts to (a) enforce its 



23 An unexpected event outside of a party's control which delays that party's ability to perform under 
a contract. 

24 According to Mr. Smith, the Redevelopment Agency's Risk Manager has approved the Developer's 
required insurance coverage. After Project completion, the Redevelopment Agency would review the 
Developer's insurance coverage every five years to check that the Developer's insurance coverage is 
commercially prudent (subject to the limitations specified in Section 7.3 of the Financing 
Agreement). 

Board of Supervisors 
Budget Analyst 

55 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



operating covenants for the hotel and the Bloomingdale's 
department store 25 , and (b) operate the mixed-use portion 
of the Project complex as required by its operating 
covenant with the City. If the Developer breaches this 
covenant, and the number of full-time equivalent jobs fall 
below levels specified in the Financing Agreement, the 
Redevelopment Agency would have the right to reduce its 
Property Tax increment contributions, or, if the Property 
Tax increment contribution term has ended, the City 
would have the right to accelerate the payment of 
participation. 

Related City and Redevelopment Agency Costs 

17. The City estimates its total costs of managing this 
proposed Project to be as follows: 

• Total expenses of up to approximately $350,000 to be 
incurred by the City Attorney's Office in relation to the 
transaction documents. These expenses would be 
reimbursed by the Developer. 

• Total expenses of approximately $350,000 expected to be 
incurred by the Redevelopment Agency for outside 
counsel. These expenses could be covered by the existing 
Yerba Buena Center Redevelopment Area budget, 
according to Mr. Carney. 

• Annual expenses incurred by the Redevelopment Agency 
for the costs of monitoring the Project. These expenses 
would be reimbursed by the Developer in the amount of 
$65,000 for each of the first three years in which the 
Developer receives Property Tax increment, then $50,000 
for each of the next four years, and then $35,000 annually 
until the end of the Property Tax increment contribution 
period (all amounts indexed for up to 3 percent annual 
inflation). 

• Total expenses of approximately $15,000 incurred by the 
Real Estate Division of the Department of Administrative 
Sendees in processing the sale of the subject portion of 
Jessie Street. These costs would be reimbursed by the 
$3,100,000 Jessie Street sale proceeds. 



25 Under the Covenant to Operate contained in Section 6.1(a)(i) of the Financing Agreement, 
Bloomingdale's, Inc. is required to operate a Bloomingdale's department store for a minimum of ten 
years after the Project's opening date, and a Bloomingdale's or other department store for a 
minimum five additional years. 

Board of Supervisors 
Budget Analyst 

56 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Summary: Emporium Development L.L.C. has proposed redeveloping 

the site of the former Emporium Building and adjacent 
warehouses and office buildings as a 1,607,000 gross square 
foot multi-story complex comprising retail, entertainment, 
restaurant, cinema, office, and hotel complex. Construction 
is scheduled to take 28 months, and would involve restoring 
historically significant portions of the former Emporium 
Building and constructing underground links to the Powell 
Street MUNI and BART station. The Project is projected to 
increase the value of the site by $516,210,742, from its 
current assessed valuation (for Property Tax purposes) of 
$69,957,924 to $586,168,666. This projected increase in the 
assessed valuation would result from improvements funded 
by a combination of private investment and Redevelopment 
Agency Property Tax increment contributions. 

According to independent real estate economics consultants, 
despite the currently strong San Francisco real estate 
market, none of the six development plans proposed for the 
Emporium Site Area would be economically feasible without 
a public subsidy because of what they term the 
"extraordinary costs" associated with retaining and restoring 
the Emporium Building, site assembly, relocation of utilities, 
and construction of new streets. For a developer to achieve 
an annual 12 percent rate of return on the cost of this 
Project, the real estate economics consultants have identified 
a "feasibility gap" of $32,800,000, a funding shortfall which 
they believe would require public funding. 

In response to this identified "feasibility gap", the 
Redevelopment Agency proposes to contribute Property Tax 
increment funds up to the amount of $27,000,000 (in net 
present value as of the date the Project opens) to reimburse 
the Developer for expenditures which alleviate blight and 
provide public benefits such as historic preservation costs, 
site assembly and preparation, transit and circulation 
improvements, and economic revitalization and job creation. 
The amount of $27,000,000 was determined through 
negotiations between the City, the Redevelopment Agency, 
and the Developer. 

The Budget Analyst has received extensive economic analysis 
related to the Developer's need for the Redevelopment 

Board of Supervisors 

Budget Analyst 

57 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



Agency's proposed Property Tax increment contribution of up 
to $27,000,000 to ensure the viability of the proposed project. 
However, none of the six development scenarios for which 
economic analyses were prepared contain information on 
Bloomingdale's, Inc.'s future plans for this valuable, centrally 
located site if the proposed Project did not proceed with the 
assistance of the Redevelopment Agency's Property Tax 
increment contribution. Therefore, the Budget Analyst is 
unable to determine the extent to which the asserted need for 
the Redevelopment Agency's proposed contributions of 
$27,000,000 in Property Tax increment to the Developer is 
necessary for the development of the property. 

Projections indicate that the City would be able to recoup 
fully its investment of Property Tax increment, plus an 
annual 12 percent simple interest return on its total 
investment, from the Project's cash flow and net refinancing 
proceeds. The City is projected to receive (a) all of the 
principal amount of its Property Tax increment contribution 
(which would have been up to $27,000,000 in net present 
value as of the Project's opening) back from Project revenues 
within the first 24 years after the Project opens, and (b) the 
annual 12 percent simple interest return on its total 
Property Tax increment contribution between years 25 and 
33 after the Project opens. 

The key risks to the City of proceeding with the proposed 
Project would be: 

• The proposed construction is either not completed or not 
opened. 

• The subject portion of Jessie Street is vacated and 
conveyed to the Developer but the complex is not built. 

• The Redevelopment Agency's contribution of S27, 000,000 
in Property Tax increment is more than the Project 
requires to be economically feasible. 

• Post-completion market conditions prevent the projected 
revenues to both the Developer and the City from being 
generated. 

• The hotel is not built. 

• There is some catastrophic event which diminishes or 
delays the City's participation in Project revenues. 



Board of Supervisors 

Budget Analyst 
58 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Tbe proposed Project contains a number of risk mitigation 
provisions, which are described in Comment No. 16 above. 

The City estimates its total costs of managing this proposed 
Project to be as follows: 

• Up to $350,000 to be incurred by the City Attorney's 
Office in relation to the transaction documents (to be 
reimbursed by the Developer). 

• Approximately $350,000 expected to be incurred by the 
Redevelopment Agency for outside counsel (to be covered 
by the existing Yerba Buena Center Redevelopment Area 
budget). 

• Annual expenses incurred by the Redevelopment Agency 
for the costs of monitoring the Project (to be reimbursed 
by the Developer). 

• Approximately $15,000 incurred by the Real Estate 
Division of the Department of Administrative Services (to 
be reimbursed by the $3,100,000 Jessie Street sale 
proceeds). 

Recommendation: Approval of the proposed resolutions is a policy matter for 
the Board of Supervisors. 



Board of Supervisors 

Budget Analyst 
59 



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FIGURE 1-2: EXISTING REDEVELOPMENT PROJECT AND THE PROPOSED ADDED AREA 



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Angus: 17,2000 



Harvey M. Rcse 

Board of Supervisors Budget Analyst 

City Hall 

1 Dr. Carlton B. Goodlett Place 

San Francisco, CA 94102 

Dear Mr. Rose, 

The proposed Yerba Buena Plan Amendment modifies the existing Yerfaa Bucna Redevelopment 
Plan by expanding the Project Area boundaries to include the adjacent Emporium Sire Area; 
making a major department store and mixed-use retail, entertainment, office and hotel 
development on the Emporium Site Area an objective of the Redevelopment Plan; providing for 
tax-increment financing up to $27 million (in net present value at the date of opening) to be 
derived only from the Emporium Site Area if needed to make the proposed development 
feasible; and incorporating significant portions of the Planning Code as the Development 
Standards for the Emporium Site Area, with modifications necessary to accommodate the 
proposed redevelopment of the area. 

To accomplish the proposed redevelopment, the Plan Amendment modifies the P lanning Code 
requirements that would otherwise apply for the Emporium Site Area in the following ways: 

Use 

■ Allows hotel and office as permitted uses (instead of conditional uses). 

■ Provides for "interval hotel suites" and for their conversion to residential use (subject to 
parking, open space and affordable housing requirements similar to those in the Code). 

These uses could be granted under the current Code, and the Plan Amendment process 
provides a greater degree of public review than does the conditional use process. 

Density, height and bulk 

■ Provides a base Floor Area Ratio (FAR) of 9:1 with no additional increase for Transferable 
Development Rights (TDRs) (current base is 6:1, increasing to 9:1 with TDRs). 

■ Increases height and bulk limits to 135-X, 200-X and 400-X (from 120-X, 160-X and 160-F). 

The FAR change provides for the amount of development necessary :o make the 
redevelopment of the site economically feasible, within the maximum development envelov 
allowable on the site under the current Code. Tne height changes allow for adjustments to 



63 



„ „ . Attach aent IV 

RUG. 17.2000 12:03PM 5 F R fl Page 2 01 1 



accommodate the relocation of the Emporium Building dome andio create a more slender 
and graceful hotel tower compatible with the adjacent towers of the Yerba Bvena Center. 

Historic preservation 

■ Provides for a specific program for remitting, restoring, rehabilitating, and acaptjvciy reusing 
the historically significant features of the Emporium Building, in lieu of Article 11. 

In finding the proposed Plan Amendment consistent with the General Plan, the Planning 
Department has determined that the Emporium Building has no substantial remaining value 
and therefore could be subject to demolition. However, the Plan Amendment specifically 
provides for retaining the historically significant features of the building including the 
Market Street facade, the historic office portion of the building and the dome and rotunda. 

Other provisions 

■ Reduces off-street fxeieht and bus loading requirements in accordance with the riband 
analyses in the Project ETR. 

■ Allows minor shadowing of Hallidie Plaza in light of the limited nature of shadowing 
established in the Project HR. 

■ Allows minor exceedances of wind comfort standards in light of the Hmirp-H n?nin - of wind 
impacts as described in the Project ETR. 

■ Retains Article 6 regarding signs, but allows certain exceptions based on compelling desizn or 
architectural justification 

Tne first three items could be granted as exemptions under the current Code, end the Plan 
Amendment process provides the same level of analysis by the Planning Department and a 
greater degree of public re^/iew than does the exemption process. The sign item provides the 
Planning Department and the Agency with the discretion to provide higher signs and greater 
projections for awning signs based on compelling design or architectural justification 

Since the Plan Amendment provides thai the Planning Code acts as the basic development 
controls in the EmDorium Site .Area, design review and approval of the project will be conducted 
by the Planning Department, in accordance with a Delegation Agreement with the 
Redevelopment Agency, The Delegation .Agreement is intended to assure that the Planning 
Code, as modified, is applied to the Emporium Site Area in a manner consistent with other areas 
in the City. 

Please call me at 749-2412 should you have any further questions. 

Sincerelv, 



William Carney 
Senior Project Manager 
Yerba Buena Center 



64 



fiUG. 17.2000 12:03FM S F R ft 

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August 17, 2000 



Harvey M. Rose 

Board of Suoervisors Budget Analyst 

City Hall 

1 Dr. Carlton B. Goodlett Place 

San Francisco, CA 94102 

Dear Mr. Rose, 

In response to the request from your office, the following provides descriptions of the six 
redevelopment alternatives analyzed for the proposed Emporium Site Area. Economic analysis 
conducted by Seaway Group and confirmed by Keyser Marston Asociates determined that all the 
alternatives, except the preferred alternative, were infeasible without substantially greater financial 
assistance. 

• Preferred Alternative - The Preferred Alternative includes new retail, entertainment, 
restaurant, cinema, office and hotel uses. The Project would retain, rehabilitate, and restore 
the Market Street facade (to a depth of 65 feet) and the existing dome and rotunda of the 
Emporium Building. The project would demolish and replace other existing buildings 
between Market and Mission streets, would relocate existing office uses within the new 
building, and would require the City to vacate a portion of Jessie Street. The Preferred 
Alternative includes 277,500 square feet of gross leasable area (GLA) of retail space, 
97,000 square feet (GLA) of entertainment space, 225,000 square feet (GLA) of office 
space, a 355,500 square foot (GLA) Bloomingdale's depanment store, and a 375,000 
square foot 210-room hotel and 60-unit interval vacation ownership componenL 

• EER. Alternative C - This alternative preserves the exterior and interior of the Emporium 
Building and the Annex Building including the Jessie Street facades. Jessie Street becomes 
a glass-enclosed "gallery" with bridges roimecting the development on either side. 
Development on the south side is limited to a four-story base and seven-story tower. This 
alternative includes 255,500 square feet (GLA) of retail space, 164,700 square feet (GLA) 
of office space, and a 357,000 square foot (GLA) Bloomingdale's department store. 

• ETR. Alternative D - This alternative also preserves most of the Emporium Building, but 
would allow selective demolition of the Jessie Street facade, as well as demolition of the 
Annex Budding. Some floors of the new addition would span Jessie Street. Development 
south of Jessie Street would also be limited to a four-story base and seven-story tower, 
although somewhat bulkier Tfon under Alternative C. This alternative includes 186,800 



65 



PUG. 17.2022 12:02PM SFRft Eage 2 Ot 1 ~ 

square feet (GLA) of retail space, 80,000 square feet (GLA) of enterainment space, 
113,300 square feet (GLA) of office space, a 401,500 square foot (GLA) Bloomingdaie's 
department store, ami a 196-room, 174,000 square foot hotel 

• EIR. Alternative E - This alternative, also known as the Existing Planning Controls 
Alternative, preserves the Emporium and Annex buildings, but ma-rimi?^ the development, 
to the event permitted unicr existing planning controls, in the area south of Jessie Street. 
This alternative includes 272,300 square feet (GLA) of retail space, 39,100 square feet 
(GLA) of entertainment space, 257,200 square feet (GLA) of office space, and a 360.200 
square foot (GLA) Bloomingdaie's department store. 

• Historic Preservation Alternative (Retail) - This alternative encompasses only the historic 
Emporium retail store, which would be historically renovated for primarily retail, with 
some office space. 

• Historic Preservation Alternative (Office) - This alternative encompasses only the historic 
Emporium retail store, which would be historically renovated for primarily office, with 
some retail space on the first two floors. 

Please call me at 749-2412 should you have any further questions. 

Sincerely, 



William Carney, 
Senior Project Manager 
Verba Buena Cenier 



66 



Attzachnenf- v I 



EXHIBIT 1 

STJMMaRY OF HISTORIC RETENTION 

AND 

RESTORATION COSTS 

(Based an Swiner:on & Walberg 3/16/00 Cost Esdmaxes) 



Dome and Rotunda Restoration S4.036* 

Market Street Facade 1 ,920 

Historic Building Retention 8.021 

Subtotal - Hard Costs per Swincrton Estimates 13,977 

Construction Contingency @ 10% LJgg 

Subtotal 15^75 

Indirect Costs @ 19 J 9 /, 1 3,002 

Total Development Cost Before Financing 1 8,377 

Financing Costs @ 19J>% 2 ,1556 

Total Develooment Cost S21.333. 



Percentage rate estimated to include architectural, engineering, legal, insurar.ee, taxes, public 
permits and fees, development management fees, and ER. Actual architectural and engineering 
costs will likely be disproDortionarely high, for historic work. 

* Average rale per project pro forma ( 33,270 /n3 l ow). As m2= y 0I "^ S ^ STOr - c preservation costs 
will occur, early on, the actual carrying costs will probably be higher. 

Mcao.001.co30.* 



67 



Attacnnienu 



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Federated 

DEPARTMENT STORES, INC. 



7 West Seventh Strwt • Cocs-jusi Ohio 4SJO?-.Z471 



September 9, 1999 



Mr. Bill Carney 

San FancfaCQ Redevelopment Agency 

770 Golden Gate Avenue 

San Francisco, California 94102 

Subject: S35 Mark** Street and Aaaodated Propertic 

Dear Bill: 



Federated Department Stores, through ita subsidiary Blonmingdale'a, Inc. succeasor to Broadway 
Stores, Inc., is the owner of the Emporium Building at 835 Market Street, Assessor's Block No. 
3705, Lot No. 43, and other properties on this block formerly used in conjunction with the 
Emporium Department Store, specifically, Lota Nos. 13 through 18, 33 and 38. 

Federated acquired Broadway Stores Inc. in 1995. Due to significant losses, the Emporium 
Department Store was closed shortly thereafter. 

Obviously, the subject property is a significant asset which Federated would very much like to put to 
productive use. In the nearly 4 years since our acquisition of Broadway Stores, Federated has 
thoroughly analyzed the potential for rehabilitation of the Emporium Building and associated 
properties for use as a department store. Based on this analysis, we have concluded that the 
tremendous Investment which would be required to rehabilitate the building as a department store 
cannot be economically justified. In short, the cost to bring to modem department store standards 
the historic, unremfbrccd masonry building, with its closely spaced columns and other challenges, is 
simply prohibitive. 

For this reason, we sought the assistance of Forest City Development to help identify a developable 
project for the Emporium property and other property, and to carry out the development of a new 
department store and complementary uses. 

Please do not hesitzte to call, if I can be of any further assistance. 




Vice President - Real Estate 



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72 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Item 8 - File 00-1581 



Department: 
Item: 



Location: 



Purpose of Lease: 



Lessor: 
Lessee: 



No. of Sq. Ft. and 
Cost Per Month: 



Annual Rent: 



Public Utilities Commission (PUC) 

Resolution authorizing a 20-year lease of Public Utilities 
Commission land between the City and County of San 
Francisco and Mid Peninsula High School, in San Mateo 
County. 

A portion of Parcel 2007(1), Bay Division Pipelines 1 and 
2, in the City of Menlo Park, San Mateo County. 

The subject property would be utilized by the Mid 
Peninsula High School, the Lessee, as (a) a paved parking 
lot, with landscaping, and (b) a grass sports playing field 
for a new school to be constructed and located in a 
converted warehouse on the adjacent property (as shown 
in the attached map provided by the PUC). 

City and County of San Francisco, through the PUC. 

Mid Peninsula High School, a small, non-profit, private 
alternative high school. 



Approximately 58,400 square feet, of which 24,080 square 
feet (approximately 41.2 percent of the total square 
footage) would be charged at $2,113 per month which is 
approximately $0,088 per square foot per month or 
approximately $1,056 per square foot annually. 
Comment No. 1 explains why only 41.2 percent of the 
subject property is chargeable. 

$25,356. The annual rent is subject to upward 
adjustment only, by the amount of any annual increase in 
the Consumer Price Index at every 12 month anniversary 
of the Rent Commencement Date. In addition to annual 
rent adjustments, the base rent could be upwardly 
adjusted to equal the fair market rent for space of 
comparable size and location on the fifth, tenth, and 
fifteenth anniversaries of the Rent Commencement Date. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

73 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Percentage Increase 

Over 1999-2000: According to Ms. Cindy Lee of the PUC, despite repeated 

attempts, the subject property has not been previously 

leased. 



Term of Lease: 

Right of Renewal: 
Description: 



Comments: 



The proposed lease would commence upon approval by the 
Board of Supervisors and would expire 20 years thereafter 
(approximately October 2020). 

None. 

The subject resolution would authorize a 20 year lease of 
approximately 58,400 square feet of City-owned land 
located in the City of Menlo Park, San Mateo County, 
which is under the jurisdiction of the PUC. The Bay 
Division Pipelines 1 and 2, which run under this land, 
transport and distribute water for the San Francisco 
Water Department. Under the proposed lease, the PUC 
would retain all rights to operate, maintain, repair, 
and/or reconstruct those pipelines. 

The proposed lease would allow the Mid Peninsula High 
School to construct (a) a paved parking lot, with 
landscaping, and (b) a grass sports playing field adjacent 
to its new high school facility which is contiguous to the 
PUC property. 

1. According to Ms. Lee, when the PUC originally 
purchased its pipeline property from local farm 
landowners, the sellers reserved the right to cross over 
and farm on their former properties. Therefore, the 
resulting grant deeds contain provisions which reserve 
cross-over and agricultural rights for the owners of the 
adjacent properties. As the current owner of an adjacent 
property, the Mid Peninsula High School retains those 
cross-over and agricultural rights. In light of such grant 
deeds, the PUC has a policy to not charge the owners of 
adjacent properties for any uses of a cross-over purpose 
(such as a driveway) or an agricultural purpose (which 
the City Attorney's Office has deemed to include 
landscaping and grass sports playing fields). Mr. Charles 
Sullivan of the City Attorney's Office confirmed that the 
PUC's policy is consistent with the language of the 
existing grant deeds. Of the subject parcel's 
approximately 58,400 square feet, approximately 34,320 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

74 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

square feet (approximately 58.8 percent) would be utilized 
for landscaping, a grass sports playing field, and driveway 
purposes. In keeping with the PUC's policy, such uses 
would not be chargeable. The remaining 24,080 square 
feet (approximately 41.2 percent) would be utilized for a 
paved parking lot and would, therefore, be chargeable as 
that use is not related to either agricultural or cross-over 
rights. 

2. According to Ms. Lee, the Mid Peninsula High School 
submitted a proposal to the PUC for how it wished to use 
the subject property. The school was responsible for 
obtaining all the necessary planning and construction 
permits. The school's proposal was then reviewed by PUC 
land engineers who inspected and approved the school's 
plans in terms of the approved uses for the subject 
property, given the need to protect the pipeline running 
through it. After that review process, the PUC 
determined what percentage of the subject property, as 
developed by the school, would be chargeable. According 
to Ms. Lee, the PUC then accepted the school's proposal 
on the basis that the City benefited from receiving some 
rent from the subject property which currently does not 
generate any rental income. Ms. Lee states that the PUC 
will monitor the Mid Peninsula High School's 
development of the subject property to ensure that the 
development conforms with the plans approved by the 
PUC. 

3. Not charging for 34,320 square feet (the total 58,400 
square foot subject property less the 24,080 square feet 
which are chargeable) results in a rental reduction of 
approximately $36,242 annually at the rental rate of 
approximately $1,056 per square foot annually. However, 
as previously noted, the PUC has a policy not to charge 
for property which is used for cross-over or agricultural 
purposes. The PUC's policy, according to Mr. Sullivan, is 
consistent with the language of the grant deeds that 
apply to such properties. 

4. Ms. Lee states that an evaluation of current market 
rental rates in the subject area was performed by the 
PUC's Bureau of Commercial Land Management and the 
proposed lease rate was determined to be the fair market 
value. According to Ms. Lee, the fair market rental rate 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

75 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



evaluation was based on (a) comparable properties in the 
Menlo Park area, (b) comparable PUC leases in the South 
Bay, and (c) rental rate information derived from a real 
estate comparison performed by Metroscan. Ms. Lee 
states that Metroscan provides real estate comparison 
services used by realtors and real estate appraisers which 
provide a monthly update of property sales and rental 
rates by geographical area. 

5. According to Ms. Lee, the subject property has no use 
to any other adjoining property owner and it is not 
suitable for other uses or independent development. As 
the subject property is only 80 feet wide and cannot have 
structures built on it, it is suitable only for vehicle 
parking lots, gardens, and recreational spaces for 
adjacent businesses. 



Recommendation: Approve the proposed ordinance. 






BOARD OF SUPERVISORS 
BUDGET ANALYST 

76 



Memo to Finance and Labor Committee 

September 27, 2000 Memo to Finance and Labor Committee Meeting 

Item 9 - File 00-1590 



Department: 
Item: 



Airport Commission 

Resolution approving a lease agreement for placement 
and operation of an Approach Lighting System with 
Sequence Flasher II (ALSF-2) between the Federal 
Aviation Administration (FAA) and the City and County 
of San Francisco, acting by and through its Airport 
Commission. 



Purpose of Lease: 



Lessor: 
Lessee: 



The proposed lease would provide the Federal Aviation 
Administration (FAA) with approximately 167,950 square 
feet of space for the upgrading and continued operation 
and maintenance of the existing Approach Lighting 
System with Sequence Flasher II (ALSF-2) located at the 
end of Runway 28R. The purpose of this system is to 
assist in ensuring the safety of aircraft movements at San 
Francisco International Airport. 

City and County of San Francisco 

Federal Aviation Administration 



Amount Payable 
to Airport: 



Term of Lease: 



Description: 



No charge to the FAA. In return, the FAA would install 
improvements in, and continue to operate and maintain 
the existing ALSF-2 at the end of Runway 28R at no cost 
to the Airport. 

Approximately 6 months, commencing April 7, 2000 and 
ending September 30, 2000, after which time the lease 
would be renewable each year at the option of the FAA. 
Under the terms of the lease, renewals would not extend 
beyond September 30, 2015. 

The proposed resolution would approve a new lease 
between the Airport and the FAA in order for the FAA to 
install minor improvements in, and continue to operate 
and maintain the Airport's Approach Lighting System 
with Sequence Flasher II located at the end of Runway 
28R. According to Ms. Diane Artz of the Airport, the 
ALSF-2, which consists primarily of a series of lights that 
extend beyond the end of Runway 28R into the San 
Francisco Bay, is used to allow aircraft pilots to transition 

Board of Supervisors 

Budget Analyst 
77 



Memo to Finance and Labor Committee 

September 27, 2000 Memo to Finance and Labor Committee Meeting 

from instrument navigation to visual navigation during 
landings. 

Ms. Artz states that the improvements to the ALSF-2 
would consist of the replacement of older lights with 
newer, more efficient lights, and the reinforcement of 
trusses located in the San Francisco Bay that support the 
individual approach lights. 

Comments: 1. The Airport Commission approved a resolution on 

August 1, 2000 stating that the ALSF-2 is essential to the 
safety of aircraft movements at San Francisco 
International Airport. 

2. According to Ms. Artz, the proposed lease would 
replace a prior lease agreement with the FAA for 
operation and maintenance of the ALSF-2, which was 
originally entered into in 1985, and renewed each year 
until in ended in April of 2000. 

3. Ms. Artz states that the vast majority of the subject 
property is located off of the end of Runway 28R in the 
San Francisco Bay, and has no practical use for anything 
other than aircraft safety provision. A small portion of 
the subject property, approximately 11,250 square feet, is 
located next to the end of Runway 28R, adjacent to the 
San Francisco Bay. According to Ms. Artz, this portion of 
the subject property also has no practical use for anything 
other that provision of aircraft safety. 

4. The resolution states that the proposed lease is for the 
placement of an ALSF-2 system. According to Ms. Artz, 
however, the subject ALSF-2 system has been in place 
since 1980, and would only receive minor improvements 
under the terms of the proposed lease. The proposed 
resolution should, therefore, be amended to reflect the 
fact that the ALSF-2 is an already-existing system, and 
that it is only receiving minor improvements under the 
terms of the new lease. 

5. As the term of the proposed lease began on April 7, 
2000, the proposed resolution should be amended to 
provide for retroactive authorization. 



Board of Supervisors 

Budget Analyst 
78 



Memo to Finance and Labor Committee 

September 27, 2000 Memo to Finance and Labor Committee Meeting 

Recommendations: 1. Amend the proposed resolution to state that the lease 

is for installation of improvements to the ALSF-2 system 
and not for "placement" of an ALSF-2 system as noted in 
Comment No. 4. 

2. Amend the proposed resolution to provide for 
retroactivity in accordance with Comment No. 5, and 
approve the proposed resolution as amended. 



Board of Supervisors 

Budget Analyst 
79 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Item 10 -File 00-1602 



Department: 
Item: 



Purpose of Lease: 



Lessor: 
Lessee: 



Airport Commission 

Resolution approving a lease agreement for the 
installation and operation of a Simultaneous Offset 
Instrument Approach (SOLA.) Localizer, a navigational aid 
instrument, between the Federal Aviation Administration 
and the City and County of San Francisco, acting by and 
through its Airport Commission. 

The proposed lease would provide the Federal Aviation 
Administration (FAA) with approximately 10,000 square 
feet for the installation and continued operation and 
maintenance of a SOLA Localizer for use on Runway 28R. 
The purpose of this system is to assist in ensuring the 
safety of aircraft movements at San Francisco 
International Airport. 

City and County of San Francisco 

Federal Aviation Administration 



Amount Payable 
to Airport: 



Term of Lease: 



Description: 



No charge to the FAA. In return, the FAA would install, 
operate, and maintain a SOLA. Localizer for use on 
Runway 28R at no cost to the Airport. 

Approximately 6 months, commencing April 7, 2000 and 
ending September 30, 2000, after which time the lease 
would be renewable each year at the option of the FAA. 
Under the terms of the lease, renewals would not extend 
beyond September 30, 2015. 

The proposed resolution would approve a new lease 
between the Airport and the FAA in order for the FAA to 
install, maintain, and operate a Simultaneous Offset 
Instrument Approach (SOLA) Localizer navigational 
system for use on Runway 28R. According to Ms. Diane 
Artz of the Airport, the Airport is currently unable to 
make simultaneous use of both of its approach runways 
used for aircraft landings during severe weather 
conditions. Consequently, severe weather conditions 
reduce the rate of aircraft arrival at the Airport from 60 
aircraft per hour to 30 aircraft per hour. The proposed 

Board of Supervisors 

Budget Analyst 

80 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



lease would allow installation and operation of a SOLA. 
Localizer navigational system, which would increase the 
rate at which aircraft could safely land at the Airport 
from 30 aircraft per hour to 45 aircraft per hour during 
severe weather conditions. 



Comments: 



Recommendation: 



1. The Airport Commission approved a resolution on 
August 1, 2000 stating that the SOLA. Localizer for use on 
Runway 28R is essential to the safety of aircraft 
movements at San Francisco International Airport. 

2. According to Ms. Artz, the subject property is located 
near, and cuts across, Runway 28R at the Airport, and 
cannot be practically used for any purpose other than 
aircraft safety provisions. 

3. As the term of the proposed lease began on April 7, 
2000, the proposed resolution should be amended to 
provide for retroactive authorization. 

Amend the proposed resolution to provide for retroactivity 
in accordance with Comment No. 3, and approve the 
resolution as amended. 



Board of Supervisors 
Budget Analyst 

81 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



Item 11 - File 00-1603 

Department: 

Item: 



Contract Term: 



Amount: 



Airport 

Ordinance authorizing the Airport Commission to approve 
the continuation of a contract with the Shuttleport/DAJA 
SFO Joint Venture to operate the Airport Curbside 
Management Program for up to four additional one year 
options commencing November 15, 2000. 

The first year extension option would extend the subject 
contract from November 15, 2000 to November 14, 2001 
(12 months). If the three additional one year extension 
options are approved by the Airport Commission in the 
future, the subject contract would be extended to 
November 14, 2004. The original contract did not require 
Board of Supervisors approval. However, approval of this 
one year extension option increases the total contract cost 
over subject contract's first two years to more than 
$10,000,000, which requires Board of Supervisors 
approval under the Charter. Approval of future one year 
extension options would not be subject to further Board of 
Supervisors approval under the subject ordinance. 

Projected to be $6,872,885, and not to exceed $6,875,000, 
for the November 15, 2000 to November 14, 2001 period. 
$6,872,885 is an approximately 16.7 percent increase over 
the $5,889,100 contract amount for the previous 12 month 
November 15, 1999 to November 14, 2000 contractual 
period. 

The budget for the November 15, 2000 to November 14, 
2001 period, compared to the previous twelve month 
contractual period, is shown on the following page. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

82 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 





Year One 


Year Two 


Increase / 


Percent 


Project Cost Summary 


Budget 


Budget 


(Decrease') 


Increase 


Project Team Staff Labor 


$343,080 


$371,830 


$28,750 


8.4% 


Project Team Staff Labor Benefits 


76,334 


81,610 


5,276 


6.9 % 


Operations Staff Labor 


2,548,142 


3,079,127 


530,985 


20.8 % 


Operations Staff Benefits 


711,074 


1,037,966 


326,892 


46.0 % 


SuperShuttle Subcontract* 1 ' 


465,000 


478,950 


13,950 


3.0 % 


Lome's Travel and Tours Subcontract 


385,000 


396,550 


11,550 


3.0 % 


Annual Support Services (2) 


450,030 


525,209 


75,179 


16.7 % 


Equipment Purchase 


58,100 


7,578 


(50,522) 


(87.0 %) 


Scheduled Annual Operating Costs 


358.659 


317.914 


(40.745) 


(11.4 %) 


Total Operating Cost 


5,395,419 


6,296,734 


901,315 


16.7 % 


Profit") 


493.681 


576.151 


82.470 


16.7 % 


TOTAL CONTRACT COST 


$5,889,100 


$6,872,885 


$983,785 


16.7 % 



Notes: 



ffl Subcontracts: DAJA, Inc., a registered MBEAVBE firm which is the 40 percent joint venture 
partner, has subcontracted with Lome's Travel and Tours and SuperShuttle to operate the door- 
to-door van curb coordination. 

(2) Annual Support Services: These comprise fees and costs for Controller services, external 
auditors, legal advisors, occupational safety and health services, human resources services, 
environmental services, financing costs, information services, operational support services, risk 
management, labor relations, and logistics and engineering support services. In Years One and 
Two, these were calculated at approximately 8.3 percent of the total operating cost excluding 
profit. 

(3) Profit: Under the terms of the subject contract, this is calculated at approximately 9.1 percent 
of the total operating cost in Years One and Two. 



Source of Funds: 



Airport revenues generated by ground transportation 
operators which pay fees to operate on Airport premises. 
Attachment I, provided by Mr. Dan Wong of the Airport, 
identifies the sources of the fees which will be paid to the 
Airport by ground transportation operators between 
November 15, 2000, and November 14, 2001 and used to 
fund the Airport Curbside Management Program. 
According to Mr. Wong, although the Year Two contract 
budget is projected to be $6,872,885, only $5,888,000 in 
ground transportation operator fee revenue (which is 
equivalent to the approximate budgeted funding for Year 
One of the contract) would need to be allocated to the 
subject Year Two contract. According to Mr. Wong, this is 

BOARD OF SUPERVISORS 
BUDGET ANALYST 
83 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

because the phased implementation of the Airport 
Curbside Management Program during Year One (see 
"Description" below) is projected to result in 
approximately $1,300,000 of under-expenditure against 
the Year One budget which had been determined on the 
basis of Joint Venture provision of full program services 
from Day One of the contract. The unexpended funds can 
be carried forward to fund the balance of the projected 
Year Two budget of $6,872,885. 

Description: On September 21, 1999, the Airport Commission awarded 

a $5,889,100 contract for the first time to operate the 
Airport Curbside Management Program at all Airport 
terminals, including the new International Terminal. The 
Airport Commission awarded the contract to the 
ShuttlePort/DAJA SFO Joint Venture (the Joint Venture) 
for one year effective November 15, 1999, extendable for 
up to four additional one-year extension options. As 
previously noted, since the contract was for less than 
$10,000,000, the original contract was not subject to 
Board of Supervisors approval. 

The Airport Curbside Management Program is designed 
to improve the quality of the Airport's ground 
transportation services. The program consolidates: 

• The Airport's taxi dispatching functions previously 
operated by AMPCO System Parking. The Joint 
Venture took over the Airport's taxi dispatching 
functions on March 1, 2000. 

• The Airport's door-to-door van curb coordination 
functions operated by three separate operating groups, 
Lome's Travel and Tours, SuperShuttle, and 
Transportation Coordinators of America. The Joint 
Venture took over the door-to-door van curb 
coordination functions on April 15, 2000. 

• Customer services for the Airport's limousine and 
scheduled transit operators. This is a new function 
required by the subject contract. The Joint Venture 
commenced limousine and scheduled transit customer 
service operations on May 27, 2000. For limousine 
operators, Joint Venture staff monitor the loading 
zones, answer customer questions, and check weigh 
bills. For scheduled transit operators, Joint Venture 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

84 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



staff monitor schedule adherence and transit activities 
at the curb, answer customer questions, and measure 
ridership. 

To perform these functions, the Joint Venture employs 
approximately 110 staff. Under the subject contract 
extension, all employees would be provided with medical 
benefits and remunerated at or above the levels required 
by the City's Minimum Compensation Ordinance (see 
Comment No. 2). 

As previously noted, the Airport approved a contract for 
its Airport Curbside Management Program on September 
21, 1999. Attachment II, provided by Mr. Wong, explains 
what Airport ground transportation deficiencies the 
subject contract is intended to address since such a 
contract had never previously been implemented at the 
Airport. According to Mr. Wong, based on the 
performance of services for which the Joint Venture has 
progressively assumed responsibility over the last seven 
months, the Airport Commission concluded that the 
Airport Curbside Management Program has improved 
Airport ground transportation providers' service and 
better managed the Airport's limited curbside loading 
zones in the following ways: 

• Increased monitoring of all ground transportation 
functions has provided Airport staff and ground 
transportation operators with additional information 
to ensure that ground transportation services conform 
to the terms of each operator's Airport Operating 
Permit. 

• Increased monitoring has reduced the potential for 
illegal solicitation activities at the various loading 
zones. 

• Increased staffing of individual loading zones has 
increased throughput of ground transportation 
vehicles by better managing traffic volumes. 

• Increased customer service means that the traveling 
public can receive answers to ground transportation 
and other Airport questions from staff who are 
independent of the ground transportation operators, 
and late night arriving passengers can access 
transportation information more easily. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

85 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



On August 29, 2000, the Airport Commission exercised 
the first one year extension option to allow the Joint 
Venture to continue operating the Airport Curbside 
Management Program for a second year effective 
November 15, 2000. Approval of this one year extension 
increases the total contract cost over its first two years to 
$12,761,985. Since that amount is more than 
$10,000,000, Board of Supervisors approval is required 
under the Charter. 

Comments: 1. The initial contract was awarded to the Joint Venture 

after a Request for Proposals (RFP) process which is 
described in the attached memorandum from Mr. Wong 
(Attachment III). According to Mr. Wong, the RFP 
provides for the longer term expansion of the Airport 
Curbside Management Program to include potential 
creation and staffing of passenger waiting lounges and 
Airport terminal ground transportation ticketing 
operations. 

2. According to Mr. Wong, the $983,785, or 
approximately 16.7 percent, increase in the contract cost 
between Year One and Year Two reflects the following 
changes: 

• Staffing enhancements and pay raises, including pay 
raises to comply with the Minimum Compensation 
Ordinance, increased by $559,735. According to Mr. 
Wong, of this $559,735 increase, $42,640 is required to 
comply with the Minimum Compensation Ordinance 
while other pay raises are due to collective bargaining 
agreements. 

• Employee benefits increased by $332,168. 

• Equipment leases and purchases, and project costs 
reduced by $91,267. 

• Service subcontracts increased by $25,500. 

• Annual support services increased by $75,179. 

• Under the terms of the contract, profit increased by 
$82,470. 

A break-down of the above figures is contained in 
Attachment TV. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 
86 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



However, the Budget Analyst notes that the Program's 
projected Year One under-expenditure of $1,300,000 
would reduce the Year One budget of $5,889,100 to 
$4,589,100. The Year Two budget of $6,872,885 would 
therefore represent an approximately 49.8 percent 
increase over Year One projected expenditures. This is 
significantly greater than the 16.7 percent increase 
explained above. According to Mr. Wong, the balance of 
the increase (a projected $1,300,000) is the result of the 
expenditure difference between the phased 
implementation of services in Year One and the provision 
of the full range of services for the entire Year Two period. 

3. The Airport is seeking approval to extend the subject 
contract by up to four years without the benefit of 
performance measures which assess the impact of the 
Joint Venture on ground transportation services at the 
Airport over the last seven months since the Joint 
Venture began progressively assuming responsibility for 
managing ground transportation services on March 1, 
2000. According to Mr. Wong, the Airport is the first 
United States airport to design and operate a curbside 
management program on this scale and, therefore, the 
Airport has no performance criteria available from any 
other airport to use in evaluating its program. 
Furthermore, Mr. Wong states that much of the first year 
of the contract (commencing on November 15, 1999) was 
taken up by infrastructure matters such as constructing 
and furnishing new offices, developing training programs 
for all employee groups, and hiring and training 
personnel. Mr. Wong states that the Program's full range 
of services have only been in operation since May 27, 2000 
(a period of four months), and that the Airport 
Commission has allowed Airport staff time to gain some 
operational experience before developing performance 
measures. 

4. In the Budget Analyst's professional judgment, 
performance measurement is a crucial component of any 
new City program and should be integrated into new 
programs from the outset. In response to the absence of 
such performance data for this new service, the Airport 
notes the following: 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

87 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

• According to Mr. Wong, the Airport Curbside 
Management Program is a program which has never 
before been implemented on a comparable scale at a 
United States airport and, therefore, the Airport will 
be the first to develop performance measures for this 
type of program. 

• The Airport Commission has formally requested 
Airport staff to develop performance measures. Mr. 
Wong advises that Airport staff are currently working 
with the contractor to draft performance measures 
over the next 60 to 90 days, so that finalized 
performance measures will become operable during 
the second contract year. In Attachment IV, Mr. 
Wong provides examples of performance measures 
currently under review. 

• The Airport has the option not to exercise any of the 
three annual contract extension options which would 
remain should the Joint Venture's performance be 
deemed inadequate against the prospective 
performance measures. However, as previously noted, 
once the Board of Supervisors approves the subject 
ordinance, the three annual contract extension 
options would not be subject to Board of Supervisors 
approval. 

• The Airport also has the right, at its sole discretion, to 
terminate the subject contract for convenience at any 
time. 

• The Program is funded through the fees paid by the 
Airport's ground transportation operators. Therefore, 
according to Mr. Wong, ground transportation 
operators have a strong vested interest in ensuring 
that the Joint Venture actually improves the Airport's 
handling of ground transportation services because 
the operators are the funders of the Joint Venture's 
services. 

Recommendation: Pending the Airport's development of performance 
measures and the inclusion of such performance measures 
in the Airport's contract with the Shuttleport/DAJA SFO 
Joint Venture, continue this proposed ordinance. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

88 



SEP. 21 '2000 12:55 650 7S4 £508 



LANDS IDE OPS 



Attachment I 



Curbside MngtProz. Cost Allocation*: 




FY 00/01 


Taxi 
Liijio 

SaAduled Buses 
OivPemand Vans 
*Based on # of Trips 


Share of Trips 


$5,889,000 


48.8% 

26.3% 

4.3% 

20 6% 

100.0% 


$2,873,000 
$1,550,000 


$253,000 
$1,212,000 


$5,888,000 



89 



SEP.21'2000 11:51 650 794 £508 



uANDSILE OPS 



Attachment I 




San Francisco International Airport 



Fax 



Data 

September 22, 2000 



No of »•«•• 
1 



Alan Gibson, Budget Analyst's Office 

Pax Number 

415.252.0461 

Tel Number 

415 554 7642x233 




£tfRo»3097 

xaTI li^rirlva CASK 126 

wv»«.fly»rb.Coni 



ong, Senior Transportation Planne r 

'Number 

650.821.6506 

T.I NutlKK 

650 621.6512 



Cammnb) 

In regards to specific issues that led to the Airport to create the Curbside Management Program, they 
include but are not limited to: 

1 Complaints from the taxicab drrvers regarding the existing taxicab service. Specifically, they drivers 
wanted a more professional transportation company expenenced in taxicab dispatching to conduct the 
operation rather than the Airporf s current public parking operator. 

2. Complaints from vanous door-to-door van operators regarding alleged dispatching irregularities. 

3. Complaints from various door-to-door ven operators regarding the apparent lack of consi6tant training of 
door-to-door van curb coordinators. 

4. Complaints from the public as to both the quality of the information given by the various dispatchers and 
curb coordinators and their customer service demeanor. 

5 Apparent lapses in service being provided by schedulec transit operators on their Airport-approved 
schedules. 

6. The need to further improve the percentage of air passengers using ground transportation se r v;ces to 
better manage increasing passenger volumes through the Airport 

7. The need to further improve efficiencies in the various ground transportation loading zones by expediting 
passenger pickups. 

B. Increasing numbers of operators illegally soliciting passengers at or near ground transportation loading 
zones 

9 The need to provide quality and comprehensive ground transportation service during late night hours for 
our customers on delayed arriving flights. 

The miormadon contained In IMS fax meaaaga. ana the accompanying document*, is pnvwcoeo and confidential Th* commumcatio.- u intended only lor 
Ins im of tnc individual or entity named acove If me reader of tne mesMpe la not the intended reapem or tnc employee or 9901! reaponjroie 10 deaver 
It to the Intended recipient, you an hereby notified tnat any dleeamtnabon. distribution or copying of ffw communication •> atncUy prohibited If you nave 
received trua communication in error, pleaee notify ui immedlaiety by telephone. 650 794 6000 



90 



SEP.18'2000 13:44 650 794 £50£ 



LANDS IDE OPS 



Attachment III 



SFO 



San Francisco International Airport 



Fax 



MM* 

September 18, 2000 



No of Page* 

1 



Alan Gibson, Budget Analyst's Office 




P.O. Box 3097 

S-an Francisco. CA 94) 26 

www.flysio.com 



Pax Number 

415.252.0461 



Tat Number 

415.554.7642x233 



Wong, Senior Transportation Planner 

Pax HiimMr 

650.821.6506 ___ 

Tal Number 

650.S21.6512 



CoiiiiiMnlt 

The following is a brief synopsis of the history of the Curbside Management Program selection process. If 
you need additional Information, please contact me. 

September &. October 1998 - Met with the Airport's ground transportation operators to develop a multi-stage 

deployment of a comprehensive curbside management program encompassing door-to-door vans, 

limousines, scheduled transit and taxicab operations. The original concept was recommended by an Airport 

ground transportation consultant 

December 1998 - Airport Commission approved Resolution #98-0321 authorizing the Airport to issue an 

RFP for a contractor to operate the Airport's Curbside Management Program. 

March 12, 1999 - Airport staff issued the RFP. 

April 7, 1999 - Pre-Proposal Conference conducted. 

May 14, 1999 - 3 proposals were submitted by the due date (i.e., CDSNet, Inc., Polans/TTMC Joint 

Venture, and ShuttlePort/DAJA Joint Venture). 

June 7, 1999 - Review panel conducted oral interview panels after reviewing the written submittals of all 

three proposers. Scores submitted to HRC for MBE/WBE rating discounts. 

June 25, 1999 - HRC submitted to Airport final scores including MBE/WBE rating discounts. 

ShuttlePort/DAJA was the highest scorer with a cumulative score of 92.2 out of 100. 

July 13, 1999 - Airport Commission approved Resolution #99-0233 authorizing the Airport Director to 

negotiate a contract with ShuttlePort/DAJA to operate the Airport's Curbside Management Program. 

September 21 , 1999 - Airport Commission approved Resolution #99-0333 to issue a contract to operate the 

Airport's Curbside Management Program to ShuttlePort/DAJA. 

November 1, 1999 - Civil Service Commission approved said contract in Notice of Action for Contract 

#4079-99/00. 

November 15, 1999 - Contract with ShuttlePort/DAJA became effective for one year with up to four 

additional one-year options 

cc: Edwin Leung/Alice Sgourakis/llze Rozenbergs/Chron/Flle 15S 
Peter Nardoza/Eddie Angeles 

Tne Information contained In this lex mesMBe, and the accompanying document:. C pnvneoeo ond connoenool. Thb communication Is Intended onty tor 
the use of the individual or entity named above. If the reader of this massage is not the Intended redplont. or tno employee or agent responsible to deliver 
It to the mtandad roelplont, you ore hereby notified that any dissemination, distribution or copying of rhls communication In smelly prohibited If you have 
received this communication in error, please notify us immediately by telephone. 650.79't.SOOO 



91 



SEP. 19 '2000 13:45 ccO Hi £50f 



l. l j;^:;^£ o?s 



. Attachment IV 
Page 1 or 4 




San Pranriico International Airport 



Fax 



September 19. 2000 



P.0 6o*K»7 

Sen Frsncuca C**»'?B 

-com 



No of Pas** 

4 



Alan Gibson - Budget Analyst's Office 

Fax Number 

415.2520461 

Tel Number 

415.554 7642x233 




650 621 6508 



Tel N«i«»«r 

650 B21 6512 



Comment* 

See the attached for a detailed breakdown of the additional positions for Year 22 of the Curbside 
Management Program I trust that it is sufficient for your report 

In regards to proposed performance standards under review, we are cun-ently reviewing the following: 

1. Reduce employee turnover in the door-to-door van limousine and scheduled bus programs by 10% in 
order to improve work unit productivity and positively effect customer service 

2. Reduce employee overtime % below industry average (currently aoproximatery 7% in tne tnsnspolatjon 
industry). 

3 Respond to 100% of all customer service Issues whether positive or negative wrthln one (1) week. 

4 Operate the entire Curbside Management Program within budgetary guidelines estab'i6ned by the Airport 
Commission and evaluate quarterly. 

Obviously, additional ones may be developed; however, we plan to finalize such performance measures 
and implement them dunng Year #2 commencing November 15, 2000 

Thank you for your time In expediting this package to the Board of Supervisors 

cc: Edwin LeungMlioe Sgourakis/llze Rozenbergs/Chron/Fite 15S 
Eddie Angeles - Fax: 1.5086 
Peter Nardoza - Fax: 1.5005 



The i.nforrnason contained in in* ftsi message, end tne accompanying coewnwm » privileged and connoentoei Tha communication It l uf KOC only to- 
Inc jf" ot the Individual 01 entity named oeove If the reader of this message is not me nienoec recipient, or tne employee or agent resDonaieie is owve- 
it to the Intended recipient, you are hereby notified rnoi .vy dissemination, dietneuoon or copying ot tne communcneon tj sincry pronJDItes >' you have 
received this communication in error, please notify us Immediately By telephone. 650.7ft4.S000 



92 



».»•»•• 1),.. a. 711 «., urn**. Atwc-nent IV 

SEP-19-2000 TOE »:M PN_SHUTTLEPORT m NO. 650 821 2703 



uttlePort/DAJA/SFO 



n f raftciscc International Airport 
), Bux 2504S0 

Vnndfico.CA 94125-0488 
•50} 821-2701 
1(650)8214709 


To: 


Dan Wong 


From: 


Daniel Bartz 


Date: 


September 19.2000 


Re: 


Budget Increase Analysis 



** 



As requested, I have pul together a page-by-page analysis of all budget increases from year 
one of the contract to year two. If you have any questions on these items, please call. 

Pace 1 Management Staffing: 



HR/Training Director changed to Assistant GM, 
Staff Salary Increases (2%) 


$22,100 
$ 6,650 


Page 2 Operations Staffing; 




Curbside Managers 




1 . Added one position to maintain 24 hour coverage 


$45,510 


2. Salary increases 


$5,463 


Taxi Supervisors 




1. Added two positions to cover new IT 10 hours daily 


$68,457 


2. Wage increases 


$21,353 


Taxi Dispatchers 




1. Added 7 positions for personnel not covered 
in original budget - Non-SF and Delta 


$208,615 


2. Added 4 positions for new IT coverage 


$119,208 


3. Wage increases 


$24,440 



93 



— -'- l - JJ0 WHCSIDE OPS 

v-iMmiau.MHimninir mn aimtm ^^^ 



Limo/Van Loading Zone Supervisors 

1. Wage increases $12,730 
Limo &. Loading Zone Monitors 

1 . Reduction of hours tor new IT (S i 7.432) 

2. Wage increases to race. Living Wage requirements $42,640 



Page 3 Management Qenefits: 



1. Health insurance increase 5% SI, 841 

2. Other benefits increase S3.435 



Page 4 Operations Benefits : 

1 . Taxi Dispatch 

a. Health insurance increase 5% 581,925 

b. Retirement plan increase 526,3 1 2 

c. Workers' Cornp Insurance - 7.3% rate 592,927 

d. Other - FICA. FLTA, SUTA S3 1,7 II 

2. Taxi Supervisors 

a. Health insurance increase 5% 514,421 

b. Retirement plan increase 54,784 

c. Workers' Comp Insurance -7.3% rate S16.824 

d. Other - FICA, FLTA. SUTA S7.737 

Page S Operauons Benefits: 

1 . Limo/Van Loading Zone Monitors 

a. Health insurance - increase 67% (higher cost than 

original budget S26.220 

b. Other - FICA. r'UTA. SUTA S1.511 

2. Lima/Van Loading Zone Supervisors 

a. Health insurance - increase 67% (higher cost than 

original budget S7.491 

b. Other - FICA, FLTA. SUTA 5 1 ,1 40 



94 



SEP.19'2000 1 3:45 650 794 c50B 

SEP-1S-2000 TUE 12:10 PH SHUTTLEPORT 



LANDSIDE OPS 

FAX NO. 650 821 2703 



Attachment IV 

i^ape k of 4 



1. Health insurance - 5% Increase 

2. Other - PICA. fUTA, SUTA 

Decrease from year one 

P^ s e 13 O fV >r Pr n 'r- gt Costs: 

Decrease from year one 
Pa ge 14 Pric^t V£ $mrirnarV' 

X. Subcontracts to Supershutllc & Lorries -3% increase 

2. Annual Support Services - same 9.1% as year one 

3. Profit - same 9.15% as year one 



$7,364 
$6,524 

C$50,522) 

($40,745) 

$25,500 
$75,179 
$82,470 



95 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 

Item 12 -File 00-1604 



Department: 



Item: 



Services to be 
Performed: 

Description: 



Public Transportation Commission (PTC) 
Municipal Railway (MUNI) 

Resolution concurring with the Controller's certification 
that facility security services for the Public Transportation 
Commission can continue to be practically performed by a 
private contractor at lower cost for the six-month period 
commencing July 1, 2000 than if work were performed by 
City and County employees. 

Facility security services for Municipal Railway operations 

Charter Section 10.104 provides that the City may 
contract with private firms for services, if the Controller 
certifies, and the Board of Supervisors concurs, that such 
services can in fact be performed by private firms at a 
lower cost than similar work by City and County 
employees. 



Facility security services for Municipal Railway (MUNI) 
operations consist of unarmed stationary and roving 
guards at MUNI facilities, armed guards attending MUNI 
employees involved in the handling of cash, tickets and 
passes, and security analysis and development of plans for 
improving physical security at MUNI facilities. 

The Controller has determined that contracting for the 
facility security services for MUNI for FY 2000-2001 would 
result in estimated savings as follows: 



Citv-Operated Sendee Costs 
Salaries 
Fringe benefits 
Total 



Lowest 
Salary 
Step 
$1,931,022 
592.513 



Highest 

Salary 

Step 

$2,305,020 

651.306 



$2,523,535 $2,956,326 



Contractual Service Cost 11 



1.590.648 



1.598,722 



Estimated Savings 



$ 932,887 $1,357,604 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 



Comments: 



*According to Mr. Joe Matranga of the Controller's Office, the 
Contractual Service Costs include (a) the current contractor's 
cost of $1,543,856 and (b) 0.5 FTE 8221 Chief, Protective 
Sendees position for contract monitoring, at the lowest salary 
step of $46,792, and highest salary step of $54,866. 

1. Facility security services for MUNI were first certified 
as required by Charter Section 10.104 in 1983 and have 
been provided by an outside contractor since 1975. 

2. As noted above, the Contractual Service Cost used for 
the purpose of the analysis is based on: (a) the current 
contractor's cost of $1,543,856 to provide facility security 
services, and (b) the salary and fringe benefits of 0.5 FTE 
8221 Chief of Protective Services (PTC), ranging from 
$46,792 at the lowest salary step to $54,866 at the highest 
salary step. 

3. The Controller's estimated savings for FY 2000-2001 
are based on a 12-month contract. However, the contract is 
for six months. 



Recommendations: 



4. The current three-year contract, which commenced on 
January 8, 1998 and expires on January 8, 2001, is with 
King Security Services, Inc. According to Mr. Walter 
Gibbons, Director of Security at MUNI, the PTC plans to 
extend the contract for one year. 

5. The Controller certified the subject security services, in 
accordance with Charter Section 10.104, on July 7, 2000. 
MUNI is therefore requesting approval of the proposed 
resolution approximately two months after the date of such 
certification. Therefore, the proposed resolution should be 
amended to provide for retroactive authorization. 

6. The Controller's supplemental questionnaire with the 
Public Transportation Department's responses is shown in 
the Attachment to this report. 

1. Amend the proposed resolution to provide for 
retroactive authorization, in accordance with Comment 
No. 5 above. 



2. Approve the proposed resolution, as amended. 



BOARD OF SUPERVISORS 

BUDGET ANALYST 

97 



Memo to Finance and Labor Committee 

September 27, 2000 Finance and Labor Committee Meeting 




Harvey M. Rose 



Supervisor Yee 
Supervisor Bierman 
President Ammiano 
Clerk of the Board 
Controller 
Steve Kawa 



BOARD OF SUPERVISORS 

BUDGET ANALYST 

98 




H/Ou 



City and County of $an Francisco 

Meeting Minutes 
^Finance and Labor Committee 

Members: Supervisors Leland Yee, Sue Merman, Tom Ammiano 
Clerk: Mary Red 



City Hall 

1 Dr. Carlton B. 

Goodlett Place 

San Francisco, CA 

94102-4689 



Wednesday, October 04, 2000 



10:00 AM 

Regular Meeting 



City Hall, Room 263 



Members Present: Leland Y. Yee, Sue Bierman, Tom Ammiano. 



Meeting Convened 

The meeting convened at 10:09 a.m. 

001429 [Sprint Spectrum Transmitter Lease at the Performing Arts Garage] 

Resolution authorizing and approving a lease of cellular transmitter space at the Performing Arts Garage to 

Sprint Spectrum Limited Partnership. (Real Estate Department) 

8/2/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

9/20/00, CONTINUED. Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Harry Quinn; Supervisor Yee; Tom Swamer, 

Sprint; Supervisor Ammiano; Ted Lakey, Deputy City Attorney; Supervisor Bierman. Continued to October 4, 2000. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Harry Quinn, Assistant Director of Property, 

Real Estate Department. 

AMENDED, AN AMENDMENT OF THE WHOLE BEARING SAME TITLE. 

RECOMMENDED AS AMENDED by the following vote: 

Ayes: 3 - Yee, Bierman, Ammiano 



001430 [Sprint Spectrum Transmitter Lease at Pierce Street Garage] 

Resolution authorizing and approving a lease of cellular transmitter space at the Pierce Street Garage to Sprint 

Spectrum Limited Partnership. (Real Estate Department) 

8/2/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

9/20/00, CONTINUED. Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Harry Quinn; Supervisor Yee; Tom Swamer, 

Sprint; Supervisor Ammiano; Ted Lakey, Deputy City Attorney; Supervisor Bierman. Continued to October 4, 2000. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Harry Quinn, Assistant Director of Property, 

Real Estate Department. 

AMENDED, AN AMENDMENT OF THE WHOLE BEARING SAME TITLE. 

RECOMMENDED AS AMENDED by the following vote: 

Ayes: 3 - Yee, Bierman, Ammiano 



DOCUMENTS DEPT, 

OCT 1 2000 

SAN FRANCISCC 
PUBLIC LIBRARY 



City and County of San Francisco 



Printed at 4:17 PM on 10/5/00 



Finance and Labor Committee 



Meeting Minutes 



October 4, 2000 



001431 [Sprint Spectrum Transmitter Lease at the Fire Station No. 43] 

Resolution authorizing and approving a lease of cellular transmitter space at the Fire Station 43 to Sprint 

Spectrum Limited Partnership. (Real Estate Department) 

8/2/00, RECEIVED AND ASSIGNED lo Finance and Labor Committee 

9/20/00, CONTINUED. Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Harry Quinn; Supervisor Yee; Tom Swamer, 

Sprint; Supervisor Ammiano; Ted Lakey, Deputy City Attorney, Supervisor BieTman. Continued to October 4, 2000. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Harry Quinn, Assistant Director of Property, 
Real Estate Department. 

AMENDED, AN AMENDMENT OF THE WHOLE BEARING SAME TITLE. 
RECOMMENDED AS AMENDED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001432 [Nextel Communications Transmitter Lease at the S.F. General Hospital Garage] 

Resolution authorizing and approving a lease of cellular transmitter space at the San Francisco General 

Hospital Garage to Nextel Communications. (Real Estate Department) 

8/2/00, RECEIVED AND ASSIGNED to Finance and Labor Committee 

9/20/00, CONTINUED. Heard in Committee Speakers: Harvey Rose, Budget Analyst, Harry Quinn, Supervisor Yee; Tom Swamer, 

Sprint; Supervisor Ammiano, Ted Lakey, Deputy City Attorney; Supervisor Bierman. Continued to October 4, 2000. 

Heard in Committee. Speakers: Han'ey Rose, Budget Analyst; Harry Quinn, Assistant Director of Property, 
Real Estate Department. 

AMENDED, AN AMENDMENT OF THE WHOLE BEARING SAME TITLE 
RECOMMENDED AS AMENDED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001455 [Reserved Funds, Human Services Department] 

Hearing to consider release of reserved funds, Department of Human Services, (Fiscal Year 2000-2001 

Budget), in the amount of $700,000 to fund the Hotel Master Lease Program that will provide and operate a 

supportive hotel for formerly homeless individuals in San Francisco, retroactive to September 1, 2000. 

(Human Services Department) 

8/14/00, RECEIVED AND ASSIGNED to Finance and Labor Committee Department requests this item be calendared at the September 

6, 2000 meeting. 

9/20/00, AMENDED. Heard in Committee. Speakers: Harvey Rose, Budget Analyst, Will Lightboume, Executive Director, Human 

Services Department; Supervisor Ammiano Amended to release $700,000 retroactively. 

9/20/OO, CONTINUED. Continued to October 4, 2000. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Will Lightboume, Director, Human Services 
Department; James Tracy, Coalition on Homelessness. 
Release ofresen'es in the amount of $700,000 approved. 
APPROVED AND FILED by the following vote: 

Ayes: 3 - Yee, Bierman, Ammiano 



City and County of San Francisco 



Printed at 4:1' PM on laiW 



Finance and Labor Committee 



Meeting Minutes 



October 4, 2000 



001492 [Marina Yacht Harbor Fees] 
Supervisor Brown 

Ordinance amending Part II, Chapter VI of the San Francisco Municipal Code (Park Code) to set fees at the 
San Francisco Marina Small Craft Harbor for services, including towing boats berthed illegally, removing 
berthholders' hazardous waste, and pumping out boats that have taken on water, and materials, including 
additional keys, harbor lines and keys and electrical adapters for temporary use. 
8/21/00, ASSIGNED UNDER 30 DAY RULE to Finance and Labor Committee, expires on 9/20/2000. 
Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Michael Morlin, Recreation and Park 
Department. 

RECOMMENDED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001675 [Government Funding, Moscone Center Expansion Project] 
Mayor 

Ordinance appropriating $157,500,000 of proceeds from Lease Revenue Bonds to fund the Moscone Center 
Expansion Project for the Department of Administrative Services for fiscal year 2000-2001. 

(Fiscal impact.) 

9/25/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Monique Moyer, Mayor's Office of Public 

Finance; Supervisor Yee; Leonard Tom, Administrative Services Department. 

RECOMMENDED by the following vote: 

Ayes: 2 - Yee, Bierman 

Absent: 1 - Ammiano 



001669 [Moscone Center Expansion Project Financing] 

Ordinance approving the issuance of Lease Revenue Bonds of the City and County of San Francisco Finance 
Corporation; approving the execution and delivery of a site lease between the City and County of San 
Francisco, as lessor, and the City and County of San Francisco Finance Corporation, as lessee; approving the 
execution and delivery of a project lease between the Corporation, as lessor, and the City, as lessee; ratifying 
previous actions taken in connection with the foregoing matters; and authorizing the taking of appropriate 
actions in connection therewith. (Mayor) 

(Fiscal impact.) 

9/20/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Monique Moyer, Mayor's Office of Public 

Finance; Supervisor Yee; Leonard Tom, Administrative Services Department. 

RECOMMENDED by the following vote: 

Ayes: 2 - Yee, Bierman 

Absent: 1 - Ammiano 



City and County of San Francisco 



Printed at 4:17 PM on 10/5/00 



Finance and Labor Committee 



Meeting Minutes 



October 4, 2000 



001531 [Rincon Park Restaurant Site Lease at the Embarcadero between Harrison and Howard Streets] 

Resolution approving lease with Rincon Park Restaurants, LLC, and the City and County of San Francisco, 
operating by and through the San Francisco Port Commission, for the development of the Rincon Park 
Restaurant Site, San Francisco, California. (Port) 
8/23/00, RECEIVED AND ASSIGNED to Finance and Labor Committee 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Richard Hillis, Port; Jim Hass. 
Amended to change term of Ground Lease from "66 years" to "50 years"; same title. 
AMENDED. 

RECOMMENDED AS AMENDED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001611 [Academy of Sciences General Obligation Bond Issuance] 

Resolution providing for the issuance of not to exceed 587,445,000 aggregate principal amount of City and 
County of San Francisco General Obligation Bonds (California Academy of Sciences Improvement Bonds, 
2000); authorizing the execution, authentication and registration of said Bonds; providing for the levy of a tax 
to pay the principal and interest thereof; providing for the appointment of depositories and other agents for 
said Bonds; providing for the establishment of accounts related thereto; ratifying certain actions previously 
taken; and granting general authority to City officials to take necessary actions in connection with the 
authorization, issuance, sale and delivery of said Bonds. (Mayor) 

(Fiscal impact.) 

9/13/00, RECEIVED AND ASSIGNED to Finance and Labor Committee 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Karen Ribble, Mayor's Office of Public 

Finance. 

RECOMMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



001612 [Neighborhood Park General Obligation Bond Sale) 

Resolution authorizing and directing the sale of not to exceed SI 4,060,000 City and County of San Francisco 
General Obligation Bonds (Neighborhood Recreation and Park Facilities Improvement Bonds, 2000), Series 
2000F; prescribing the form and terms of said Bonds; authorizing the execution, authenticanon and 
registration of said Bonds; providing for the appointment of depositories and other agents for said Bonds; 
providing for the establishment of accounts related thereto; approving the forms of official notice of sale and 
notice of intention to sell Bonds; directing the publication of the notice of intention to sell Bonds; approving 
the form and execution of the official statement relating thereto; approving the form of the continuing 
disclosure certificate; approving modifications to documents; ratifying certain actions previously taken; and 
granting general authority to City officials to take necessary actions in connection with the authorization, 
issuance, sale and delivery of said Bonds. (Mayor) 






(Fiscal impact.) 

9/13/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Karen Ribble, Mayor's Office of Public 

Finance. 

Amendment of the Whole to maintain flexibility in the naming and issuing of the bonds. 

AMENDED, AN AMENDMENT OF THE WHOLE BEARING NEW TITLE by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



City and County of San Francisco 



Printed at 4.1 ~ PM on 10SV0 



Finance and Labor Committee Meeting Minutes October 4, 2000 

Resolution authorizing and directing the sale of not to exceed $14,060,000 City and County of San Francisco 
General Obligation Bonds (Neighborhood Recreation and Park Facilities Improvement Bonds, 2000), Series 
200_; prescribing the form and terms of said Bonds; authorizing the execution, authentication and registration 
of said Bonds; providing for the appointment of depositories and other agents for said Bonds; providing for the 
establishment of accounts related thereto; approving the forms of official notice of sale and notice of intention 
to sell Bonds; directing the publication of the notice of intention to sell Bonds; approving the form and 
execution of the official statement relating thereto; approving the form of the continuing disclosure certificate; 
approving modifications to documents; ratifying certain actions previously taken; and granting general 
authority to City officials to take necessary actions in connection with the authorization, issuance, sale and 
delivery of said Bonds. (Mayor) 

(Fiscal impact.) 

RECOMMENDED AS AMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



001613 [Golden Gate General Obligation Bond Sale] 

Resolution authorizing and directing the sale of not to exceed $17,060,000 City and County of San Francisco 
General Obligation Bonds (Golden Gate Park Improvements, 1992), Series 2000E; prescribing the form and 
terms of said Bonds; authorizing the execution, authentication and registration of said Bonds; providing for the 
appointment of depositories and other agents for said Bonds; providing for the establishment of accounts 
related thereto; approving the forms of official notice of sale and notice of intention to sell Bonds; directing the 
publication of the notice of intention to sell Bonds; approving the form and execution of the official statement 
relating thereto; approving the form of the continuing disclosure certificate; approving modifications to 
documents; ratifying certain actions previously taken; and granting general authority to City officials to take 
necessary actions in connection with the authorization, issuance, sale and delivery of said Bonds. (Mayor) 

(Fiscal impact.) 

9/13/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Karen Ribble, Mayor's Office of Public 

Finance. 

Amendment of the Whole to maintain flexibility in the naming and issuing of the bonds. 

AMENDED, AN AMENDMENT OF THE WHOLE BEARING NEW TITLE. 

Resolution authorizing and directing the sale of not to exceed $17,060,000 City and County of San Francisco 
General Obligation Bonds (Golden Gate Park Improvements, 1 992), Series 200_; prescribing the form and 
terms of said Bonds; authorizing the execution, authentication and registration of said Bonds; providing for the 
appointment of depositories and other agents for said Bonds; providing for the establishment of accounts 
related thereto; approving the forms of official notice of sale and notice of intention to sell Bonds; directing the 
publication of the notice of intention to sell Bonds; approving the form and execution of the official statement 
relating thereto; approving the form of the continuing disclosure certificate; approving modifications to 
documents; ratifying certain actions previously taken; and granting general authority to City officials to take 
necessary actions in connection with the authorization, issuance, sale and delivery of said Bonds. (Mayor) 

(Fiscal impact.) 

RECOMMENDED AS AMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



City and County of San Francisco 5 Printed at 4:17 PM on 10/5/00 



Finance and Labor Committee 



Meeting Minutes 



October 4, 2000 



001614 [Academy of Sciences General Obligation Bond Sale] 

Resolution authorizing and directing the sale of not to exceed $15,095,000 City and County of San Francisco 
General Obligation Bonds (California Academy of Sciences Improvement Bonds, 2000), Series 2000G; 
prescribing the form and terms of said Bonds; authorizing the execution, authentication and registration of said 
Bonds; providing for the appointment of depositories and other agents for said Bonds; providing for the 
establishment of accounts related thereto; approving the forms of official notice of sale and notice of intention 
to sell Bonds; directing the publication of the notice of intention to sell Bonds; approving the form and 
execution of the official statement relating thereto; approving the form of the continuing disclosure certificate; 
approving modifications to documents; ratifymg certain actions previously taken; and granting general 
authority to City officials to take necessary actions in connection with the authorization, issuance, sale and 
delivery of said Bonds. (Mayor) 

(Fiscal impact.) 

9/13/00, RECEIVED AND ASSIGNED to Finance and Labor Committee 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Karen Ribble, Mayor's Office of Public 

Finance. 

Amendment of the Whole to maintain flexibility in the naming and issuing of the bonds. 

AMENDED, AN AMENDMENT OF THE WHOLE BEARING NEW TITLE. 

Resolution authorizing and directing the sale of not to exceed SI 5,095,000 City and County of San Francisco 
General Obligation Bonds (California Academy of Sciences Improvement Bonds, 2000), Series 200_; 
prescribing the form and terms of said Bonds; authorizing the execution, authentication and registration of said 
Bonds; providing for the appointment of depositories and other agents for said Bonds; providing for the 
establishment of accounts related thereto; approving the forms of official notice of sale and notice of intention 
to sell Bonds; directing the publication of the notice of intention to sell Bonds; approving the form and 
execution of the official statement relating thereto; approving the form of the continuing disclosure certificate; 
approving modifications to documents; ratifying certain actions previously taken; and granting general 
authority to City officials to take necessary actions in connection with the authorization, issuance, sale and 
delivery of said Bonds. (Mayor) 

(Fiscal impact.) 

RECOMMENDED AS AMENDED by the following Note: 

Ayes: 2 - Yee, Ammiano 
Absent: 1 - Bierman 



001523 (Contracting out Airport parking management operations for fiscal year 2000/01] 

Resolution approving the Controller's certification that parking management services for San Francisco 

International Airport can practically be performed by private contractor at a lower cost for the year 

commencing July 1, 2000 than if work were performed by City employees at budgeted levels. (Airport 

Commission) 

8/22/00, RECEIVED AND ASSIGNED to Finance and Labor Committee 

9/20/00, CONTINUED TO CALL OF THE CHAIR Heard in Committee Speakers Harvey Rose, Budget Analyst 

Heard in Committee. Speakers: Harvey Rose. Budget Analyst; Fred Strong, Parking Management Services, 

Airport. 

Amended to provide retroactivity. 

AMENDED. 



City and County of San Francisco 



Printed at 4:1' PM on 10.VW) 



Finance and Labor Committee 



Meeting Minutes 



October 4, 2000 



Resolution approving retroactively, the Controller's certification that parking management services for San 

Francisco International Airport can practically be performed by private contractor at a lower cost for the year 

commencing July 1, 2000 than if work were performed by City employees at budgeted levels. (Airport 

Commission) 

RECOMMENDED AS AMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



001622 [Grant to acquire Compressed Natural Gas (CNG) vehicles for permitted Airport bus operators to 
promote clean fuel use] 
Supervisor Leno 

Resolution authorizing the Airport Commission to accept and expend a grant in the amount of $140,000 from 

the Bay Area Air Quality Management District (Air District) for acquisition of Compressed Natural Gas 

(CNG) buses. (Airport Commission) 

9/14/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Roger Hooson, Airport. 

RECOMMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



001623 [Grant to acquire Compressed Natural Gas (CNG) vehicles for permitted Airport shuttle bus operators 
to promote clean fuel use] 
Supervisor Leno 

Resolution authorizing the Airport Commission to accept and expend a grant in the amount of 5980,000 from 

the Bay Area Air Quality Management District (Air District) for acquisition of Compressed Natural Gas 

(CNG) shuttle vehicles. (Airport Commission) 

9/14/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Roger Hooson, Airport. 

RECOMMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



001412 [Butterfly Museum] 
Supervisor Bierman 

Hearing to consider the status of the Environmental Impact Report and fund raising campaign for the proposed 

Butterfly Museum. 

7/31/00, RECEIVED AND ASSIGNED to Transportation and Land Use Committee. 

9/26/00, TRANSFERRED to Finance and Labor Committee. 

Continued to October 18, 2000. 
CONTINUED by the following vote: 

Ayes: 3 - Yee, Bierman, Ammiano 



SPECIAL ORDER - 11:30 A.M. 



City and County of San Francisco 



Printed at 4:17 PM on 10/S/00 



Finance and Labor Committee Meeting Minutes October 4, 2000 



001509 (Displacement/evictions of Arts Community and Non-Profit organizations! 
Supervisor Ammiano 

Hearing to inquire into: 1) the recent displacement and evictions of the arts community and non-profit 
organizations; (2) the results of two studies conducted by the San Francisco Arts Commission and the Mayor's 
Office of Community Development. 

8/21/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Supervisor Ammiano; Pam David, Director, Mayor's Office of Community 
Development; Richard Newirth, Director, Cultural Affairs, Art Commission; Jim Morales, Executive Director, 
Redevelopment Agency; Jeff Jones; Jack Davis; Krissy Keefer; Debra Walker; Hank Wdson; Andrew Wood; 
Keith Hennessy; Tony Kelly; Carlos Romer; Rebecca Graff, Housing Rights Committee; Mark Tully, Political 
Ecology Group; Rachel Kaplan; Maxina Ventura; Edward Evans, Community Resources Action Project; 
Jared Kaplan; Catherine Kavanaugh; Russell Cramer; Nancy McNally, Stanford Music Department; Treavor 
Allen, Theatre Bay Area; Sini Anderson, Sister Spit; Jo Kreiter, Flyaway Productions; Katy Barnhill; Kevin 
Schaub; Glynn Washington, Human Services Network; Walter Cidlowski, 6th Street Photography Workshop; 
Peter Rothblatl; Lori Lewis, Dance Mission. 
CONTINUED TO CALL OF THE CHAIR. 



ADJOURNMENT 



The meeting adjourned at 12:32 p.m. 



City and County of San Francisco 8 Printed at 4:1' PM on 10/S/00 



[Budget Analyst Report] 

Susan Horn 

Main Library-Govt. Doc. Section 







CITY AND COUNTY it^SS^Wf/ 0F SAN FRANCIS CO 



.BOARD OF SUPERVISORS 

BUDGET ANALYST 

1390 Market Street, Suite 1025, San Francisco, CA 94102 (415) 554-7642 
FAX (415) 252-0461 

DOCUMENTS DEPT. 

September 28, 2000 

OCT - 3 2000 

TO: ^Finance and Labor Committee 

SAN FRANCISCO 
FROM: , Budget Analyst PUBLIC LIBRARY 

SUBJECT: ^October 4, 2000 Finance and Labor Committee Meeting 

Items 1. 2, and 3 - Files 00-1429, 00-1430. and 00-1431 

Note: These items were continued by the Finance and Labor Committee at its 
meeting of September 20, 2000. 

Department: Department of Administrative Services (DAS) 

Division of Real 'Estate (DRE) 

Items: Item 1, File 00-1429 : Resolution authorizing and 

approving a lease of cellular transmitter space at the 
Performing Arts Garage to Sprint Spectrum Limited 
Partnership. 

Item 2, File 00-1430 : Resolution authorizing and 
approving a lease of cellular transmitter space at the Pierce 
Street Garage to Sprint Spectrum Limited Partnership. 

Item 3, File 00-1431 : Resolution authorizing and 
approving a lease of cellular transmitter space at the Fire 
Department Station 43 to Sprint Spectrum Limited 
Partnership. 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 






Locations: 



Purpose of Leases: 



Lessor: 

Lessee: 

No. of Sq. Ft. and 
Rent Per Month: 



Item 1. File 00-1429 : The Performing Arts Garage, 
administered by the Parking Authority and located on the 
northeast corner of Grove and Gough Streets (Assessors 
Block 792, Lot 29). 

Item 2, File 00-1430 : The Pierce Street Garage, 
administered by the Department of Parking and Traffic and 
located on Pierce Street, between Lombard and Chestnut 
Streets (Assessor's Block 490, Lots 9-13). 

Item 3. File 00-1431 : Fire Department, Station 43, located 
at 720 Moscow Street, between France and Italy Streets 
(Assessor Block 7338, Lot 24). 

To allow Sprint Spectrum Limited Partnership to place 
cellular telephone transmitters on several City buildings 
(discussed below). 

City and County of San Francisco 

Sprint Spectrum Limited Partnership (SSLP) 



Item 1. File 00-1429: 

Approximately 375 square feet at 
$3,000 per month ($36,000 annually) 

Item 2. File 00-1430 : 

Approximately 500 square feet at 
$3,000 per month ($36,000 annually) 

Item 3. File 00-1431 : 

Approximately 250 square feet at 

$2,500 per month ($30,000 annually, see Comment No. 1) 



Annual Rent Payable 
by Sprint Spectrum to 



The City: 



Items 1 and 2. Files 00-1429 and 00-1430 : 
$36,000 per year, per lease 

Item 3. File 00-1431 : 

$30,000 per year (see Comment No. 1) 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

Beginning in the year 2001, and for the remaining four 
years of each of the three proposed leases, the base rent will 
be adjusted every July 1 st by the annual percentage 
increase in the Consumer Price Index (CPI). The monthly 
base rent on or after the adjustment date cannot be less 
than the monthly base rent in effect immediately prior to 
the adjustment date. 

Term of Leases: The three proposed leases with Sprint Spectrum would 

commence upon approval by the Board of Supervisors and 
the Mayor, and the earlier of: (1) 30 days following the 
tenant's written notice to the City that it has obtained all 
permits and approvals necessary for the tenant to be legally 
entitled to construct a facility for providing cellular 
telephone services; or, (2) 30 days following the date the 
tenant begins construction of the communications facilities 
for those phases for which SSLP has already received 
building permits (e.g. electrical wiring). The proposed 
leases are expected to commence in Fall of 2000 and would 
expire five years after the commencement date (in Fall of 
2005). 

Rights of Renewal: Under the terms of each of the proposed leases, the tenant 
would have three options to extend each lease for five 
years, for a total maximum lease term of 20 years per lease. 
Prior to each 5-year option, the base rent would be adjusted 
to equal the fair market rent of the subject property. This 
adjustment would be determined by the Department of 
Real Estate (DRE), using a market survey approach for 
comparable space leased for cellular telephone 
transmitters. Attachment I, provided by DRE, states how 
DRE sets its rental rates for such cellular telephone 
transmitters. 

Utilities and Janitorial 

Provided by Lessor: The lessee will pay for the costs of all utilities and janitorial 
services for each of the three proposed leases. 

Tenant 

Improvements: Upon commencement of the subject leases, SSLP will 

install at its own cost its cellular equipment on the three 

subject City buildings. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Descriptions: 



Item 1, File 00-1429 : The proposed resolution would 
authorize a 5-year lease between the City and Sprint 
Spectrum Limited Partnership (SSLP) for space on top of 
the Performing Arts Garage, located on the northeast 
corner of Grove and Gough Streets (Assessors Block 792, 
Lot 29). 

Under the subject lease, SSLP proposes to construct and 
maintain a cellular telephone transmitter, including six 
transmitter cabinets on the top deck of the Performing Arts 
Garage and nine antennae panels attached to the outside of 
the parapet surrounding the garage's top deck. 

Item 2. File 00-1430 : The proposed lease would authorize 
a 5-year lease between the City and SSLP for space on top 
of the Pierce Street Garage, located on Pierce Street, 
between Lombard and Chestnut Streets (Assessor's Block 
490, Lots 9-13). 

Under the subject lease, SSLP proposes to construct and 
maintain a cellular telephone transmitter on the top deck of 
the Pierce Street Garage, including six antennae and the 
placement of a transmitter room containing seven cabinets 
above the stairway in the rear of the parking lot. 

Item 3, File 00-1431 : The proposed lease would authorize 
a 5-year lease between the City and SSLP for space on top 
of the Fire Department Station 43, located at 720 Moscow 
Street, between France and Italy Streets (Assessor Block 
7338, Lot 24). 

Under the subject lease, SSLP proposes to construct and 
maintain a cellular telephone transmitter on the roof of the 
Fire Station, including seven transmitter cabinets and nine 
antennae. 



Comments: 



1. According to Mr. Larry Jacobson of DRE, the proposed 
rental rate of $3,000 per month for the first two proposed 
leases at the Performing Arts Garage and the Pierce Street 
Garage (Items 1 and 2, Files 00-1429 and 00-1430) and 
$2,500 per month for the third proposed lease at the Fire 
Department Station 43 (Item 3, File 00-1431) represent the 
DRE's current rate for cellular communication site leases 
and are considered to be fair market value. Attachment I, 
provided by DRE, states how DRE determines the market 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



rate for cellular transmitter space. According to Mr. 
Jacobson, tbe rental value of a cellular communication site 
is based on tbe service provided to cellular phone users and 
the amount of potential phone traffic at specific locations, 
not on the basis of square feet. The rentable area at each of 
the three proposed leases varies in size due to the differing 
size specifications of the equipment needed at each location. 
The $3,000 monthly rent for each of the first two leases 
(Performing Arts Garage and the Pierce Street Garage) is 
$500 more per month than the $2,500 monthly rent for the 
third lease (Fire Department Station 43) because the first 
two leases would allow SSLP to service more vehicles than 
would the third lease, according to Mr. Jacobson. 

2. Mr. Jacobson advises that DRE does not complete a 
competitive bidding process for awarding leases for cellular 
transmitter space. As stated in Attachment II, provided by 
DRE, SSLP selected the subject sites as part of the 
company's City cellular coverage plan. SSLP then 
requested to lease the cellular transmitter space from the 
City, as is the regular procedure, according to Mr. 
Jacobson. 

3. According to Mr. Jacobson, at each of the three proposed 
locations there is sufficient space for a second cellular 
phone company to place a transmitter and antenna, as is 
required by the Federal Communications Commission 
(FCC). 

4. According to Mr. Richard Lee of the Department of 
Public Health (DPH), Environmental Health Section, DPH 
reviews a Radiofrequency Radiation Ambient Report for all 
requests for cellular transmitter space on City and private 
property in the City. Mr. Lee reports that DPH reviewed 
reports for the three subject leases to ensure that the radio- 
frequency radiation levels of each cellular transmitter 
would comply with standards set by the FCC and the 
America National Standards Institute (ANSI). 

5. Each of the three proposed resolutions authorizes the 
Director of Property to "...enter into any amendments or 
modifications to the Lease... that the Director of Property 
determines, in consultation with the City Attorney, are in 
the best interest to the City, do not increase the rent or 
otherwise materially increase the obligations or liabilities 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

of the City, are necessarily advisable to effectuate the 
purposes of the lease or this resolution, and are in 
compliance with all applicable laws, including the Charter." 

6. As of the writing of this report, Mr. Harry Quinn of the 
Department of Real Estate (DRE) advises that DRE is still 
negotiating with SSLP over the terms of the three subject 
leases. Mr. Quinn reports that DRE will present any 
amendments to the leases directly to the Finance and 
Labor Committee at its meeting of October 4, 2000. 

Recommendation: Approval of the three proposed resolutions is a policy 
matter for the Board of Supervisors. 






BOARD OF SUPERVISORS 
BUDGET ANALYST 



^ "City 'and County of San Francisco 




Attachment I 

Real Estate Division 
Administrative Services Department 



MEMORANDUM 



DATE: August 17, 2000 

TO: Ernfly Newman 

Budget Analyst Offic 

FROM: Larry Jacobson 

Real Estate Division 



SUBJECT: Cell Phone Transmitter Rental Rates 




This memorandum is to inform you of the three fees currently applied to ceil phone transmitter 
sites that are large enough for a second ceO phone company to co-locate and put a second 
transmitter in operation. 

• 35,000.00 per month: Sites adjacent to US 101 Freeway, 1-80 and Bay Bridse anoroach 
as well as Doyle Drive and the Golden Gate Bridge, e.g., Hall of Justice San Francisco 
General Hospital. Rent is based upon traffic counts of 92,000,000 vehicles per annum 
on US 101/1-80, and 44,000,000 vehicles per annum on the Golden Gate Bridge 

• 53,000.00 per month: Site covering neighborhoods, e.g., Visitacion Valley Excelsior 
etc, which have large coverage area but low vehicle count on the streets, as well as 
major high volume streets, e.g., Oak, Fell, Gough, Franklin, Lombard, ere. Rent is 
based upon Oak-Fell, 25,000,000 vehicles per annum; Gough-Frankiin, 22,000 000 

• vehicles per annum; and Lombard, 13,000,000 vehicles per year. 

• S2,000-2,500 per month: Micro coverage for sites in geographically hard to reach areas 
such as Civic Center Plaza, Laguna Honda Boulevard at Dewey Boulevard intersection, 
three million vehicles per annum 



If ycu have any questions piease cail me at 554-9863. 



I/I— Vcc:!pn trznsmcr rend HudztAnaivs /wtc 



(415) 5=4-9350 
FAX: (415) 5 = 2-92"! 5 



Office of the Director of Property 
25 Van Ness Avenue, Suite 400 



San Francisco, CA 94102 



& 



City and County of San rrancisco 




Attachment II 
neaj estate uvi^iuh 
Administrative Services Department 



MEMORANDUM 



DATE: September L, 2000 

TO". Emiiie Neumann 

Budget Analyst's Office 

FROM: Larry Jacobscn 

Senior Real Prcperr/ Office: 

SUBJECT: Siting Cellular Phone Transmitters; 

Reason il is impractical to resuest bids 



Each cellular phone company establishes its own set ox" ceils; each ceil covers a SniVo 
geographic area. Tne area of the cell, generally round, is affected by both topography and 
the amount of telephone traffic within any gee graphic area. 

Cellular phone companies have different ceil conngurations. Tat cellular phone ccmcaay 
determines where to place the transmitter and approaches the property owner. 

The City and County of San Francisco can often - accommodate ceil phone ccmoanies on 
City properry - but not always. Toere may be problems such as finding scace for the 
transmitter equipment, 24-hour access, proximity to neighboring apanmem houses etc 
Since cellular phone companies have differing needs for siring ceil phone transmitters, it is 
impractical to request bids for a ipeciric site since generally only one company has an 
interest in a selected site. 

r malty, FCC requirements provide for co-location of ceQ phone equipment. Tae ccmcanies 
doing business in San Francisco have accroached the Gty on a number of occasions seeking 
co-locaticn; however, to date co-location has not occurred on City property. 






(41 5) 554-2350 
FAX: {415} 552- 



■i^TZ/L- ftr-Joh sacsrjr rningBiaigcArjiy* 



216 



Cffjca of the Cirecor of Frccerry 
25 Van Ness Avenue, Surta iCQ 



Sin Francises, CA 3* 
TTJTCL =.2: 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

Item 4 - File 00-1432 

Note: This items was continued by the Finance and Labor Committee at its 
meeting of September 20, 2000. 



Department: 
Item: 

Location: 

Purpose of Lease: 

Lessor: 

Lessee: 

No. of Sq. Ft. and 
Rent Per Month: 



Department of Administrative Services (DAS) 
Division of Real Estate (DRE) 

Resolution authorizing and approving a lease of cellular 
transmitter space at the San Francisco General Hospital 
Parking Garage to Nextel Communications. 

The San Francisco General Hospital Parking Garage, 
located at 23 rd and Utah Streets (Assessor's Block 4219, Lot 
1). 

To allow Nextel Communications to place cellular 
telephone transmitters on the San Francisco General 
Hospital Parking Garage. 

City and County of San Francisco 

Nextel Communications 



Approximately 150 square feet, at $3,000 per month 
($36,000 annually, see Comment No. 1) 



Annual Rent Payable 

By Nextel Communications 

to the City: $36,000 annually. Beginning in the year 2001, and for the 

remaining four years of the lease, the base rent will be 
adjusted every July 1 st by the annual percentage increase 
in the Consumer Price Index (CPI). The monthly base rent 
on or after the adjustment date cannot be less than the 
monthly base rent in effect immediately prior to the 
adjustment date. 



Term of Lease: 



The proposed lease with Nextel Communications would 
commence upon approval by tbe Board of Supervisors and 
the Mayor, and the earlier of: (1) 30 days following the 
tenant's written notice to the City that it has obtained all 
permits and approvals necessary for the tenant to be legally 
entitled to construct a facility for providing cellular 
telephone services; or, (2) 30 days following the date the 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Rights of Renewal: 



tenant begins construction of the communications facilities 
for those phases for which Nextel Communications has 
already received building permits (e.g. for electrical wiring). 
The proposed lease is expected to commence in the Fall of 
2000, and would expire five years after the commencement 
date (in Fall of 2005). 

Under the terms proposed lease, the tenant would have 
three options to extend the lease for five years, for a total 
maximum lease term of 20 years. Prior to each 5-year 
option, the base rent would be adjusted to equal the fair 
market rent of the subject property. This adjustment would 
be determined by the Department of Real Estate (DRE), 
using a market survey approach for comparable space 
leased for cellular telephone transmitters. Attachment I, 
provided by DRE, explains how DRE sets its rental rates 
for such cellular telephone transmitters. 



Utilities and Janitorial 

Provided by Lessor: The lessee will pay for the costs of all utilities and janitorial 

services. 
Tenant 
Improvements: Upon commencement of the subject lease, Nextel 

Communications will install at its own cost its cellular 

equipment on the roof of the San Francisco General 

Hospital Parking Garage. 



Description: 



The proposed resolution would authorize a 5-year lease 
between the City and Nextel Communications for space on 
the roof of San Francisco General Hospital Parking Garage, 
located at 23 rd and Utah Streets (Assessor's Block 4219, Lot 
1). 

Under the subject lease, Nextel Communications proposes 
to construct and maintain a cellular telephone transmitter, 
including six transmitter cabinets on the fifth level of 
General Hospital Parking Garage and six antennae on the 
roof of the elevator tower. 



Comments: 



1. According to Mr. Larry Jacobson of DRE, the proposed 
rental rate of $3,000 per month for the subject lease with 
Nextel Communications represents DRE's current rate for 
cellular communication site leases and is considered to be 
fair market value. According to Mr. Jacobson, the rental 
value of a cellular communication site is based on the 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



10 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



service provided to cellular phone users and the amount of 
potential phone traffic at specific locations, not on the basis 
of square feet. 

2. Mr. Jacobson advises that DRE does not complete a 
competitive bidding process for awarding leases for cellular 
transmitter space. As stated in Attachment II, provided by 
DRE, Nextel Communications selected the subject site as 
part of the company's City cellular coverage plan. Nextel 
Communications then requested to lease the cellular 
transmitter space from the City, as is the regular 
procedure, according to Mr. Jacobson. 

3. According to Mr. Jacobson, the location of the subject 
lease on the General Hospital Parking Garage contains 
sufficient space for a second cellular phone company to 
place a transmitter and antenna, as is required by the 
Federal Communications Commission (FCC). 

4. According to Mr. Richard Lee of the Department of 
Public Health (DPH), Environmental Health Section, DPH 
reviews a Radiofrequency Radiation Ambient Report for all 
requests for cellular transmitter space on City property and 
privately-owned property in the City. Mr. Lee reports that 
DPH reviewed the report for the subject lease to ensure 
that the radio-frequency radiation levels of the proposed 
cellular transmitter would comply with standards set by 
the FCC and the America National Standards Institute 
(ANSI). 

5. The proposed resolution authorizes the Director of 
Property to "...enter into any amendments or modifications 
to the Lease... that the Director of Property determines, in 
consultation with the City Attorney, are in the best interest 
to the City, do not increase the rent or otherwise materially 
increase the obligations or liabilities of the City, are 
necessarily advisable to effectuate the purposes of the lease 
or this resolution, and are in compliance with all applicable 
laws, including the Charter." 

6. As of the writing of this report, Mr. Harry Quinn of the 
Department of Real Estate (DRE) advises that DRE is still 
negotiating with Nextel Communications over the terms of 
the subject lease. Mr. Quinn reports that DRE will present 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

any amendments to the lease directly to the Finance and 
Labor Committee at its meeting of October 4, 2000. 

Recommendation: Approval of the proposed resolution is a policy matter for 
the Board of Supervisors. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

12 



b*Y 



City'and County of San Frandsco 




Attachment I 

Real Estate Division 
Administrative Services Department 



MEMORANDUM 



DATE: August 17, 2000 

TO: Emily Newman 

Budget Analyst Offic 



1 



FROM: Lany Jacobson 

Real Estate Division 



SUBJECT: Ceil Phone Transmitter Rental Rates 

This memorandum is to inform you of the three fees currently applied to ceil phone transmitter 
sites that are large enough for a second cell phone company to co-locate and put a second 
transmitter in operation. 

• 35,000.00 per month: Sites adjacent to US 101 Freeway, 1-30 and Bay Bridge approach 
as well as Doyle Drive and the Golden Gate Bridge, e.g., Hall of Justice, SanFrancisco 
General Hospital. Rent is based upon traffic counts of 92,000,000 vehicles per annum 
on US 101/1-80, and 44,000,000 vehicles per annum on the Golden Gate Bridge 

• 33,000.00 per month: Site covering neighborhoods, e.g., Visitacion Valley, Excelsior 
etc, which have large coverage area but low vehicle count on the streets, as' well as 
major high volume streets, eg., Oak, Fell, Gough, Franklin, Lombard, etc. Rent is 
based upon Oak-Fell, 25,000,000 vehicles per annum; Gough-FrankJin, 22 000 000 

. • vehicles per annum; and Lombard, 13,000,000 vehicles per year. 

• 32,000-2,500 per month: Micro coverage for sites in geographically hard to reach areas 
such as Civic Center Plaza, Laguna Honda Boulevard at Dewey Boulevard intersection, 
three million vehicles per annum 



If you have any questions please caD me at 554-9863. 



I/I— Vccllph inmsmtr rer.U 3udatAnaiv5 /wie 



(415)554-9350 
FAX: (415) 552-9216 



Office of the Director of Property 
25 Van Ness Avenue, Suite 400 



San Francisco, CA 94102 



[. ' 



& 



City and County of San t-rancisco 




Attachment II 

Administrative Services Department 



MEMORANDUM 



DATE: 


September 1, 2000 


TO: 


EmiSe Neumann 
Eudgct Analyst's OSes 


FROM: 


Larry Jacobscn 

Senior Real Property Office 


SUBJECT: 


Siting Cellular Phone Transn 



Reason it is impractical to request bids 



Each cellular phone company establishes its own set of eels; each cell covers a finite 
geographic area. Tae area of the ceil, generally round, is affected by both topograDhy and 
the amount of telephone traSc within any gee graphic area. 

Cellular phone companies have different ceil configurations. Trie cellular phone comoarry 
determines where to place the transmitter and approaches the property owner. 

The City and County of San F ran cisco can often accommodate cell phone ccmnanies en 
City property - but not always. Taere may be problems such as fmtiina scace fbr the 
transmitter equipment, 24-hour access, proximity to neighboring apartment houses etc. 
Since cellular phone companies have differing needs for siting ceil phone transmitters, it is 
unpractical to request bids for a specific site since generally only cne company has an 
interest in a selected sue. 

Finally, FCC requirements provide for co-!ccaricn of ceil phene equipment. The ccmDanies 
doing business in San Francisco have approached the Chy en a number of occasjccs seeking 
co-location; however, to date co-lccaticn has not occurred on City property. 



'J uscsLIf'eraph saosrjr 3ting 2ud;i Atji?» .'as 
(4-. 5) 554-=a=n cffic , cf >ihe p; recior Qf Frcoerr; 

FAX: (41 5) 552-S21 S 25 Van Ness Avenue, Suite W 



Sin Fr=ncisc=. CA 3- 
TOTSL = 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

Item 5 - File 00-1455 

Note: This item was continued from the September 20, 2000 Finance and Labor 
Committee meeting. 



Department: 
Item: 



Amount: 
Source of Funds: 



Description: 



Department of Human Services (DHS) 

Hearing to consider the release of reserved funds for the 
Department of Human Services for Fiscal Year 2000- 
2001, in the amount of $636,000, to fund the Hotel Master 
Lease Program that will provide and operate a supportive 
hotel for formerly homeless individuals in San Francisco. 

$636,000 

FY 2000-2001 DHS budget. During the FY 2000-2001 
budget review, the Finance and Labor Committee 
recommended and the full Board of Supervisors approved 
reserving $700,000 in the DHS budget for an additional 
master-leased hotel for homeless clients. DHS is now 
requesting release of the full amount of $700,000, and not 
$636,000 as stated in the hearing notice. 

DHS implemented the Hotel Master Lease program in 
1999 to provide housing in residential hotels to formerly 
homeless clients. Currently, DHS has a contract with 
Tenderloin Housing Clinic (THC), a nonprofit 
organization which was selected through a Request for 
Proposal (RFP) process, to operate supportive housing 
programs for formerly homeless clients in residential 
hotels. In FY 1999-2000 THC entered into master lease 
agreements with three residential hotels (Seneca Hotel, 
Mission Hotel, and Jefferson Hotel) to provide supportive 
housing. In the FY 2000-2001 budget, DHS proposed two 
new master lease agreements in addition to the three 
master lease agreements noted above, for a total of five 
hotels with master lease agreements. DHS included 
$1,099,025 in the FY 2000-2001 budget for the two new 
master lease agreements: $399,025 for a master lease 
agreement with the Vincent Hotel at 459 Turk Street to 
provide 103 rooms for homeless clients and $700,000 for a 
master lease agreement for an undetermined hotel. The 
Board of Supervisors reserved $700,000, pending selection 
of a residential hotel. DHS is requesting release of 
$700,000, which includes $636,000 for a new master lease 
agreement with the Hartland Hotel and $64,000 to 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



l s 



•Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



increase the amount of the master lease agreement with 
the Vincent Hotel, as noted below. 

DHS is requesting release of $636,000 of the $700,000 in 
reserved funds for a contract with THC to operate a 
supportive housing program at the Hartland Hotel at 909 
Geary Boulevard. In July of 2000, DHS issued an RFP for 
a contractor to operate a supportive housing program and 
to enter into a master lease agreement with a new hotel. 
The RFP specified that the successful bidder was required 
to have experience working with formerly homeless 
individuals in a supportive housing environment and to 
have an agreement from a residential hotel owner to enter 
into a long-term master lease. Only THC responded to 
the RFP. The Human Services Commission approved the 
proposed contract with THC on August 24, 2000. Under 
the proposed contract between DHS and THC, THC would 
enter into a 10-year master lease agreement with the 
Hartland Hotel, 909 Geary Boulevard, to provide 137 
rooms for homeless clients. The hotel rooms were 
available September 1, 2000, and approximately 54 
former tenants of the Hartland Hotel who were displaced 
when the hotel burned in February of 1999 began moving 
back into the hotel. As explained in the attached 
memorandum (Attachment I), Ms. Julie Brenman of DHS 
states that the master lease agreement for the 
management and operation of the supportive housing 
program at the Hartland Hotel became effective on 
September 1, 2000, and therefore, the request for the 
release of the reserved funds is retroactive. 

DHS reports that other prospective tenants, who are 
participants in the PAES program 1 or who are currently 
sleeping in homeless shelter beds, have been identified. 
The former tenants of the Hartland Hotel who were 
displaced due to the fire will pay the monthly room rental 
rate in effect for each tenant prior to the fire. Under the 
master lease agreement, the room rental rate for new 
tenants will be $450 per month, which is the same rate in 
effect for the master lease agreements with the Vincent, 
Seneca, and Mission Hotels. The monthly room rental 



1 The PAES (Personal Assisted Employment Services) program, which was implemented by DHS in 
October of 1998, is a voluntary program available to all General Assistance recipients who are 
employable but are temporarily unemployed. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



•Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Budget: 



rate under the master lease agreement with the Jefferson 
Hotel is $400 per month. 

Additionally, DHS is requesting release of $64,000 of the 
$700,000 to partially fund an increase in the master lease 
agreement with the Vincent Hotel. According to Mr. 
Kayhan, the actual lease agreement with the Vincent 
Hotel is $471,958, which is $72,933 more than the 
budgeted amount of $399,025. Mr. Kayhan states that 
DHS included funds for approximately 10 to 11 months of 
operation of the supportive housing program at the 
Vincent Hotel. Mr. Kayhan reports that the hotel became 
available for occupancy on June 1, 2000, and that tenants 
began to move into the hotel in June of 2000. Therefore, 
Mr. Kayhan states that the Vincent Hotel will be occupied 
for the full 12 months of FY 2000-2001, rather than 10 to 
11 months, as originally anticipated. Mr. Kayhan states 
that additional funds in the amount of $8,933 ($72,933, 
which is the amount of the shortfall, less $64,000, which 
is the amount of available funds on reserve) are available 
in the FY 2000-2001 DHS budget. 

The proposed budget for the Vincent and Hartland Hotels 
supportive housing programs is as follows: 





Funds 


Funds 


Additional 


Total hotel 




appropriated 


reserved in 


funds 


operating 




and available 


FY 2000- 


available 


and 




in FY 2000- 


2001 budget 


in DHS 


supportive 




2001 budget 


process 


budget 


services costs 


Vincent Hotel 










Operating costs 1 


$399,025 


$ 64,000 


$ 8,933 


$471,958 


Hartland Hotel 










Operating costs 1 




517,633 






Supportive services 2 




118,367 




636.000 


Total reserved funds 




$700,000 




$1,107,958 



1 Operating costs include salaries and benefits of hotel staff; 
hotel operating expenses, such as utilities building 
maintenance supplies, insurance, and elevator contract. 

2 The supportive housing program at the Hartland Hotel will 
incur costs for supportive services in addition to the costs for 
supportive services included in the FY 2000-2001 DHS budget 
for the supportive services for the other four hotels (Seneca, 
Mission, Jefferson and Vincent Hotels). 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Comment: 



Recommendation: 



Attachment II, provided by DHS, contains details to 
support the summary budget noted above. 

According to Mr. Kayhan, the target population for the 
residential hotel master lease program are homeless 
participants in the PAES program, and low-income 
working adults, recipients of Supplemental Security 
Income Pending program (SSIP), Veterans 
Administration benefits, Supplemental Security Income 
(SSI) and Social Security funds, who are currently 
residing in emergency shelters. Under the contract with 
THC, DHS will refer new clients to THC for placement in 
the hotel. All clients will be eligible for supportive 
services provided by THC. The master lease agreements 
with the Vincent and Hartland Hotels provide for a 
monthly room rental rate of $450. Mr. Kayhan states 
that tenants will pay all or a portion of the monthly rent, 
depending on income, and DHS will provide rental 
subsidies up to $150 per month to eligible tenants. Mr. 
Kayhan reports that DHS implemented the rental subsidy 
program in 1998 to aid PAES program participants for 
whom homelessness was a barrier to employment. The 
rental subsidy program, which is operated by THC, 
provides a time-limited rental subsidy to homeless 
individuals who have developed an employment plan. 
PAES participants are eligible for the rental subsidy for 
12 months, with the possibility of extensions up to a 
maximum of 27 months. If PAES participants obtain an 
income of $815 per month or greater, they are no longer 
eligible for the subsidy. SSIP clients are eligible for the 
subsidy until they begin receiving SSI, and other working 
clients are eligible for the subsidy until they achieve an 
income of $601 monthly. 

Approve retroactively release of the requested funds in 
the amount of $700,000. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Attachment "I 



Z\iy and County of San Francisco Department of Human Services 

Will Lightbourne 

Executive Director 

Deputy Directors 

Bill Bettencourt 

Jim Buick 

Sally Kipper 

MEMORANDUM 

September 13, 2000 

TO: Severin Campbell, Budget Analyst's Office 

FROM: Julie Brenman, Director of Planning and Budget 

RE: Retroactive Approval for Release of Reserve 

DHS is requesting the release of $700,000 in reserved funds for the master lease hotel program. 
We had originally tried to calendar this item for the August 23, 2000 meeting of the Finance and 
Labor Committee. Unfortunately, the Committee's calendar was very full and we were told that 
your office would not be able to provide an analysis of the item. As you know, the Board of 
Supervisors then cancelled all of their meetings for the next three weeks. The September 20, 
2000 meeting was the first meeting of the Finance and Labor Committee after the August 23 rd 
meeting. 

While our request was made with enough notice to calendar the item on August 23 rd , it was not 
made with far enough in advance of the committee meeting to provide your office with adequate 
time to analyze the request. We were not able to make our request earlier because the contractor 
was not selected until mid- August and funds were placed on reserve pending contractor 
selection. 

At the time we learned that the Committee would not be able to consider the release of reserve 
until September 20 th , we faced two options: (1) Delay the start of the program past the planned 
start date of September 1, 2000, which would leave homeless persons without housing, or (2) 
Start the program prior to formal Committee approval. Given these two options, our Executive 
Director, Will Lightbourne, met with Supervisor Yee, the Chair of the Committee and a 
representative from Supervisor Ammiano's office, as Supervisor Ammiano had originally 
requested the funds be placed on reserve pending contractor selection. At both meetings, he 
explained that the Board's vacation schedule created a situation where it was necessary for us to 
begin the program on September 1 st and seek retroactive Committee approval at the September 
20 th hearing. 

The new masterlease program for the Hartland hotel did in fact start on September 1, 2000. 
While no funds have been expended to date as we have not received our first invoice, we have 
committed the funds to the contractor. 

If you have any questions, please contact me at 557-5641. 



15)557-5000 P.O. Box 7988 San Francisco, California 94120 



Attachment II 
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Attachment 
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II 



Appendix B, Page 
| Document Date: 4/21/00 
DEPARTMENT OF HUMAN SERVICES CONTRACT BUDGET SUMMARY 

BY PROGRAM 


Contractor's Name 
Tenderloin Housing Clinic, Inc. 


Contract Term 
7/1/00 to 6/30/03 


(Check One) New Renewal Modification [7] 
If modification. Effective Date of Mod. No. of Mod. 


Program: 


Hartland 


Budaet Reference Page No.(s) 


Supportive Svcs 


Proeram Term: 


Mod 8/2000 


Expenditures 

Salaries & Benefits 


S65.067 


Operating Expense 


S50.900 


Capital Expenditure 


S2.400 


Subtotal 


3118,367 


Indirect Cost 




Indirect Percentage (%) of direct cost (Line 
16) 




Total Expenditures 


SI 18.367 


DHS Revenues 

General Fund 


S118367 








































































TOTAL DHS REVENUES 


S118J67 


Other Revenues 




























































Full Time Equivalent (FTE) 


2.1 


Prepared by: Kerry Abbott 


1 1' 1 
Telephone No.: (415)771-2427 Date: 1/4/00 


DHS-CO Review Signature: 






DHS#1 






3/18/99 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Item 6 -File 00-1492 

Department: 

Item: 



Description: 



Recreation and Parks Department (RPD) 

Ordinance amending Part II, Chapter VI of the San 
Francisco Municipal Code (Park Code) to set fees at the 
San Francisco Marina Small Craft Harbor for services 
(including towing boats berthed illegally, removing berth- 
holders' hazardous waste, pumping out boats that have 
taken on water) and materials (including additional keys, 
harbor lines and keys and electrical adapters for 
temporary use). 

The proposed ordinance would change the fee structure 
for services provided and for goods that can be purchased 
at the San Francisco Marina Small Craft Harbor. The 
proposed ordinance would also require deposits on certain 
Harbor items currently used by patrons, in addition to the 
proposed fees. 

Specifically, proposed changes to the existing fee 
structure for services at the Harbor include: 

• Increasing fees for pumping out boats that are taking 
on water from $40 to $50 for the first incident, and 
from $40 to $100 for each incident after the first. After 
a third incident, the berthing agreement with the 
tenant requiring the service would be cancelled; 

• Instituting a fee of $50 for towing illegally birthed or 
unregistered transient vessels; 

• Instituting a fee of $50 for removal and disposal of 
hazardous materials left on the docks, such as 
batteries and motor oil, by Harbor staff; and 

• Instituting a fee of $25 for installation of dock line 1 . 



Proposed changes to the existing 
materials at the Harbor include: 



fee structure for 



Increasing the amount charged for purchase of dock 
lines from $10 to $25; and 

Increasing the amount charged for replacement of lost 
kevs from $3 to $20. 



1 "Dock line" is rope that is used to tie boats to the docks, ensuring that they do not drift from their 

berths. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

22 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Comments: 



Proposed fee changes would also include the addition of 
the following deposits: 

• Addition of a $20.00 deposit requirement for use of 
Harbor keys by transient boaters; and 

• Addition of a $100.00 deposit requirement for use of 
Harbor electrical adapters 2 at transient berths. 

1. According to Mr. Ed Ross, Harbor Master of the San 
Francisco Marina Small Craft Harbor, proposed fees are 
intended to recover costs presently being incurred by the 
Harbor under the current fee structure. Mr. Ross notes 
that some of the proposed fees are also meant to act as a 
deterrent, and that such fees should curtail unwanted and 
costly activity by Harbor tenants. 

2. Mr. Ross states that, based on activity at the Harbor in 
FY 1999-2000, the proposed fees could result in total 
revenues of $6,590 per year, or $5,228 more than FY 
1999-2000 revenue of $1,362. The following is a 
breakdown of the revenue that would be generated by the 
proposed fees: 



Fee 


Revenue 

Under FY 

1999-2000 

Fees 


Estimated 

Revenue - 

Proposed 

Fees 3 


Pumpout Services 


$960 


$1,800 


Towing 





600 


Hazardous Waste Removal 





..4 


Harbor Line Installation 





1,250 


Provision of Keys 


402 


2,680 


Provision of Harbor Line 





260 


Total 


$1,362 


$6,590 



2 According to Mr. Ed Ross, Harbor Master at the San Francisco Marina Small Craft Harbor, the 
electrical infrastructure at the docks is out of date and does not allow modern vessels to connect 
directly to the Harbor electrical system. The electrical adapters provided by the Harbor enable 
modern boats to connect to the Harbor electrical system. 

3 As noted earlier, this estimate is based on activity at the Harbor during FY 1999-2000. Since the 
proposed fees are expected to deter some of the activity requiring these services, this revenue 
estimate represents a likely upper bound for potential revenues. 

4 As of the writing of this report, the Harbor was unable to provide an estimate as to how often 
Harbor staff removed hazardous materials from the docks in FY 1999-2000. Mr. Ross states that he 
expects that, if the proposed fees are approved by the Board, very few tenants will continue to leave 
inappropriate materials on the docks. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



In addition to fee revenues shown above, charging a 
deposit for electrical adapters would deter theft, which 
cost the Marina Small Craft Harbor $2,400 in FY 1999- 
2000. 

3. According to Mr. Ross, the recommended fees have 
been established based on the estimated cost of staff time 
and materials for each service. Mr. Ross notes these 
activities generally do not require overtime by Harbor 
personnel. 

4. Mr. Ross reports that the 1999 performance audit of 
the Marina Small Craft Harbor performed by the 
Controller's Office contained a general recommendation 
for the Harbor to enforce its current rules more strictly. 
Mr. Ross notes that the proposed fees are responsive to 
that recommendation in that they will provide financial 
disincentives to breaking certain regulations that are 
currently ignored my many tenants. For example, Mr. 
Ross states that the leaving of hazardous materials on the 
docks, and the failure to personally replace deteriorating 
dock line are both currently against Harbor rules; 
however, currently there are no consequences to violating 
these rules, and they are thus disregarded by many 
tenants. The proposed ordinance would establish a fee 
that would be charged to tenants when Harbor staff is 
forced to remove hazardous waste or replace deteriorating 
dock line. 

5. According to Ms. Angela Gengler of RPD, the proposed 
fee increases would be the first increases in Marina Small 
Craft Harbor fees since prior to 1993 5 . 

6. Mr. Ross reports that revenues that would be realized 
from the proposed fees were not included in the FY 2000- 
2001 budget. 

Recommendation: Approval of the proposed ordinance is a policy matter for 

the Board of Supervisors. 



5 As of the writing of this report, the Harbor was not able to identify exactly when Harbor fees were 
adjusted last. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

Items 7 and 8 - Files 00-1675 and 00-1669 

Departments: Mayor's Office of Public Finance 

Convention Facilities Management 
Department of Administrative Services 

Items: Supplemental appropriation ordinance for $157,500,000 

of proceeds from Lease Revenue Bonds for the Moscone 
Center Expansion Project (File 00-1675). 

Ordinance approving the issuance of $157,500,000 in 
lease revenue bonds of the City and County of San 
Francisco Finance Corporation; approving the execution 
and delivery of a site lease between the City and County 
of San Francisco as Lessor, and the City and County of 
San Francisco Finance Corporation, as Lessee; approving 
the execution and delivery of a project lease between the 
Corporation, as Lessor, and the City, as Lessee; ratifying 
previous actions taken in connection with the foregoing 
matters; and authorizing the taking of appropriate 
actions in connection therewith (File 00-1669). 

Amount: $157,500,000 

Source of Funds: Net Proceeds from Lease Revenue Bonds for Moscone 
Center Expansion Project 

Description: In March of 1996, the voters of San Francisco approved 

the lease financing of a further expansion of the Moscone 
Convention Center (Moscone West) through the issuance 
of $157,500,000 of lease revenue bonds. Moscone West, to 
be located at 4 th and Howard Streets, will consist of an 
800,000 square foot free-standing convention facility, 
providing 300,000 square feet of rentable exhibit and 
meeting room space on three floors. The Moscone West 
expansion will increase the existing approximately 
600,000 rentable square foot of exhibit and meeting room 
space for Moscone Center by 50 percent, to provide a total 
of approximately 900,000 square feet of leasable 
convention and exhibit space. This expansion will enable 
the City to attract a greater number and larger 
conventions than are currently able to be booked into the 
existing facility. The remaining 500,000 square feet of the 
Moscone West expansion project (800,000 square foot 
expansion less 300,000 square foot of leaseable exhibit 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



and meeting rooms) would be used for lobby space, utility 
rooms, truck delivery areas, elevator and stairs, back 
offices, and related support services. 

The proposed ordinance (File 00-1669) would approve the 
issuance of an aggregate principal amount not to exceed 
$157,500,000 of Lease Revenue Bonds by the San 
Francisco Finance Corporation. The San Francisco 
Finance Corporation is a nonprofit public benefit 
corporation, formed in 1991 to, among other purposes, 
facilitate lease financing for the City. The $157,500,000 of 
bonds are anticipated to be sold in three separate series in 
the principal amount of $52,500,000 for each series 
(Series 2000-1 Bonds, Series 2000-2 Bonds and Series 
2000-3 Bonds) in November of 2000. 

The proposed supplemental appropriation (File 00-1675) 
would appropriate the entire $157,500,000 for the costs 
related to the bonds and the Moscone West expansion 
project. As shown in Attachment I, proceeds from the 
proposed $157,500,000 bond issuances would be used to 
pay for an estimated $133,000,000 of the $169,610,000 
total construction contract costs for Moscone West. The 
balance of $24,500,000 ($157,500,000 bond issuance less 
the $133,000,000 net bond proceeds for the contract) 
would be used to pay for capitalized interest, the 
underwriters discount and the cost of issuing the bonds, 
as discussed in the Budget Section below. 

To date, the City has completed the planning and design 
of the facility, acquired the site, completed demolition and 
excavation of the site, and begun construction. As shown 
in Attachment II, to date, the City has appropriated a 
total of approximately $157 million for this project. 
Construction of Moscone West is anticipated to be open 
for operation by July of 2003. 

The proposed ordinance would also approve (1) a Site 
Lease and (2) a Project Lease between the City and the 
San Francisco Finance Corporation. Under the Site Lease , 
the Moscone Center West site would be leased by the 
City, as the lessor, to the San Francisco Finance 
Corporation, as the lessee. Under this Site Lease, the San 
Francisco Finance Corporation would pay the City $1 of 
advance rent, for the period from November 1, 2000 to 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



?fi 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

November 1, 2030, which is the expected term for the 
lease revenue bonds and the Project Lease. Under the 
Project Lease , the Moscone Center West facility would be 
leased by the San Francisco Finance Corporation, as the 
lessor, back to the City, as the lessee. The City, under the 
Project Lease, will be required to make rental payments 
to the Corporation for the use and occupancy of Moscone 
West equal to the payments on the bonds and all ongoing 
costs related to these bonds, such as the annual 
administrative fees of the trustee. Ms. Sarah Hollenbeck 
of the Mayor's Office of Public Finance advises that this 
transfer of Moscone West from the City to the San 
Francisco Finance Corporation and back to the City under 
the Site and Project Leases is typical for the City's lease 
financing and is the same structure the City employed in 
the financing for the previously authorized 911 
Emergency Center. Ms. Hollenbeck advises that the total 
rental payments under the Project Lease are anticipated 
to average approximately $9,682,511 annually, and would 
be a City General Fund obligation. 

Budget: Construction Fund $133,000,000 

Capitalized Interest 22,000,000 

Underwriters Discount 264,000 

Costs of Issuance 2.236.000 

Total $157,500,000 

As shown in Attachment I, the total estimated cost of 
Moscone West is $358,295,000, including a construction 
contract cost of $169,610,000. The proposed issuance of 
$157,500,000 of lease revenue bonds is anticipated to 
provide $133,000,000 of construction funds for the 
Moscone West Project, with the balance of $24,500,000 
($157,500,000 less $133,000,000) to be used for 
capitalized interest, underwriters discount and the costs 
of issuance, as itemized above. Capitalized interest 
expenses are the required debt service payments on the 
bonds during the period between the sale of the bonds and 
the completion of the capital improvement project because 
under State law the City cannot be obligated to pay rent 
on the project until it has beneficial use of the facility. 

Since 1996, the Board of Supervisors has appropriated 
approximately $157 million and to date, the City has 
expended approximately $120 million for the design, site 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



acquisition and preliminary construction of Moscone 
West. As shown in Attachment II, these funds include: 
Convention Facilities Funds of $58,682,200, Hotel Taxes 
of $81,300,000 and Other Revenues of $16,814,700, for a 
total of $156,796,900, which thus far has been sufficient 
to support the ongoing expenditures of 'he Moscone West 
expansion project. As a result, to date, none of the 
$157,500,000 in lease revenue bonds authorized by the 
voters in 1996 have been sold. By deferring the sale of 
these bonds, the City has reduced the amount of 
capitalized interest that will be incurred. 

The proposed ordinances would authorize the issuance of 
the $157,500,000 of lease revenue bonds by the San 
Francisco Finance Corporation and appropriate these 
funds for the Moscone West project and related expenses. 
The remaining $68,498,100 (total project cost of 
$358,295,000 less $289,796,900, which includes 
$156,796,900 of previously appropriated funds and 
$133,000,000 from the subject bonds allocated to the 
project) would still need to be appropriated for the 
completion of this project. Mr. Leonard Tom of the 
Convention Facilities Management advises that the 
$68,498,100 of remaining funds are anticipated to be 
provided from the General Fund, primarily from the 
City's Hotel Taxes (See Comment No. 9). 

Ms. Erin McGrath of the Mayor's Office advises that the 
convention and exhibits revenues generated by Moscone 
West are estimated to be approximately $8.6 million in 
FY 2003-04, and to increase each subsequent year. 
According to Ms. McGrath, these revenues will be used to 
pay for the direct operating costs for Moscone West. Ms. 
McGrath advises that Moscone West is estimated to cost 
approximately $10 million beginning in FY 2003-04 and 
to increase subsequently, such that the projected 
operating costs will continue to be greater than the 
revenues generated by Moscone West, such that these 
revenues would not be directly available to pay for the 
debt service on the proposed lease revenue bonds. 



Comments: 1. The Department of Public Works (DPW) is responsible 

for managing the construction of Moscone West, and has 
hired, under an RFP process, Moscone Associates Joint 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

28 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Venture, a five-member joint venture with The Allen 
Group and EPC Consultants as lead partners, to assist 
with certain construction management aspects of the 
construction project. In 1996, the architecture team of 
Gensler/Michael Willis/Kwan Henmi Joint Venture was 
selected through an RFP process to design Moscone West. 
In June of 2000, after a competitive bid process was 
completed, DPW awarded the general construction 
contract in the amount of $169,610,000 to Hunt 
Construction Group (HCG), which was previously known 
as Huber, Hunt and Nichols, the firm which constructed 
PacBell Park and San Francisco City Hall. HCG began 
construction work on the Moscone West project on August 
7, 2000. 

2. Mr. Dave Sanchez of the City Attorney's Office advises 
that there will be two outside bond counsel firms involved 
in the issuance of these bonds, including Jones Hall, LLP 
and a local WBE firm, Leslie M. Lava. Both firms were 
selected through a RFP process. In addition, Ms. 
Hollenbeck advises that the City has hired Kitahata & 
Company, a local MBE firm and Montague DeRose and 
Associates, as financial advisors on this project. According 
to Ms. Hollenbeck, the City will purchase a bond 
insurance policy from Ambac Assurance Corporation, a 
AAA-rated insurer and will further mitigate the potential 
risk of the proposed variable rate short-term bonds 
through a liquidity bank, Morgan Guaranty Trust 
Company. The liquidity bank will ensure that in the 
event the bonds cannot be remarketed, the liquidity bank 
will purchase the bonds and hold them until they can be 
remarketed. 

3. The proposed $157,500,000 of lease revenue bonds are 
anticipated to be issued approximately November 1, 2000. 
In accordance with language in the proposed ordinance, 
the bonds interest rates cannot exceed 12 percent. 
However, according to Ms. Hollenbeck, the lease revenue 
bonds are proposed to be issued under a new multi-modal 
structure, which would permit more flexibility in 
determining the interest rates for the bonds by allowing 
the City to take advantage of the current more favorable 
short-term variable interest rates or alternatively to use 
the more traditional long-term fixed rate bonds, 
depending on market conditions at the time the bonds are 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

actually sold. In either case, Ms. Hollenbeck advises that 
the bonds would be issued with a given final maturity 
date. However, with the fixed rate bonds, the interest rate 
would be determined for the life of the issue at the time 
the bonds were sold. Alternatively, under the proposed 
variable rate bonds, the interest rate would be reset at 
specific intervals, such as daily, or weekly. Investors who 
purchase these short-term bonds would have the option to 
"put" their bonds back each time the interest rate is reset, 
through a remarketing agent, who would adjust the rates 
if necessary to attract buyers. 

4. As discussed in Attachment III, provided by Ms. 
Hollenbeck, a five-year comparison of variable interest 
rate bonds and fixed rate bonds found that short-term 
weekly rates averaged 3.54 percent vs. 5.77 percent for 
long-term (30 year) fixed rate bonds. Over a ten-year 
period, the averages were 3.51 percent for weekly variable 
rates and 6.19 percent for long-term fixed rates. As shown 
in Attachment III, assuming an interest rate of 3.91 
percent for a variable rate bond issuance and 5.45 percent 
for a fixed rate bond issuance, issuance of a variable rate 
bond would provide $3,248,905 of additional funds to be 
available for construction of Moscone West and require 
$1,862,438 less in capitalized interest costs for the City. 
Ms. Hollenbeck also advises that although bond insurance 
and a liquidity facility would be required for the variable 
rate bonds, a separate set-aside reserve fund will not be 
required for these variable rate bonds. As a result, 
overall, as shown in Attachment III, the average annual 
debt service payments would be $1,457,921 lower with the 
proposed variable rate bonds vs. the fixed rate bonds, 
which over the life of the 30-year bonds would be 
approximately $50 million, or $26 million present value, 
according to Ms. Hollenbeck. 

5. Attachment III also details both the advantages and 
disadvantages of using variable rate debt as well as the 
steps that will be taken to mitigate the risks associated 
with variable rate debt. As discussed in Attachment III, 
although short-term rates have historically been lower 
than longer-term rates, there is no guarantee that (1) 
short-term rates will continue to be lower than long-term 
rates, that (2) the long-term rate that the City could lock 
in when these bonds are sold in November of 2000, would 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

in 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



be higher than future short-term rates and (3) there is 
significantly more volatility and therefore risk, in short- 
term rates. However, Ms. Hollenbeck advises that an 
analysis of rates over the past ten years indicates that 
there was only one year (1990), when short-term rates 
were higher on average than the estimated (5.45%) long- 
term rate at which the City has assumed the fixed rate 
long-term bonds could be sold. Furthermore, Ms. 
Hollenbeck reports that the Mayor's Office of Public 
Finance believes "the risks associated with the variable 
rate debt can be mitigated sufficiently for the City to be 
comfortable assuming the relatively limited amount of 
variable rate exposure represented by the proposed 
Moscone financing." 

6. Ms. Hollenbeck advises that San Francisco has never 
issued any variable rate debt previously. However, she 
advises that the State of California, the Counties of San 
Diego and Los Angeles and the Cities of Los Angeles, San 
Diego and San Jose have issued such variable debt in the 
past to take advantage of the more favorable interest 
rates. 

7. According to Ms. Hollenbeck, although it is possible to 
issue a combination of fixed rate and variable rate bonds, 
the Mayor's Office of Public Finance currently anticipates 
that all of the proposed $157,500,000 of Moscone West 
lease revenue bonds would be issued as variable rate 
bonds because of the more favorable interest rate 
environment. Assuming the entire $157,500,000 is issued 
as variable rate bonds, the total gross debt service over 
the 30-year life of the bonds is anticipated to be 
$279,389,363, and the average annual debt service, after 
the capitalized interest period, is anticipated to be 
$9,682,511. Including the capitalized interest period, the 
average annual debt service is anticipated to be 
$9,312,979. 

8. The proposed $157,500,000 of lease revenue bonds are 
proposed to be issued in three separate series of 
$52,500,000 each, which would be issued concurrently. 
According to Ms. Hollenbeck, since a separate 
remarketing agent will be hired by the City to sell each of 
the three series, this procedure should foster competition 
to allow the City to receive the lowest interest rates, and 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

tbe City does not receive favorable interest rates, Ms. 
Hollenbeck advises that the City can remove and replace 
one or more of the remarketing agents. Currently, the 
three remarketing agents selected through an RFP 
process, managed by the Mayor's Office of Public Finance, 
are (1) JP Morgan Co. (2) Banc of America Securities and 
(3) E.J. de la Rosa, a DBE firm. 

9. The Convention Facilities Fund will be the source of 
funds for the lease revenue payments. However, because 
the Convention Facilities Fund must be subsidized by the 
City's General Fund, the City's General Fund is 
ultimately obligated to make the required lease payments 
to the San Francisco Finance Corporation to cover the 
costs of the debt service and related administrative 
expenses of the bonds. However, it should be noted that in 
1996, the City increased the Hotel Tax from 12 percent to 
14 percent, an increase of two percent, with the intention 
that the additional revenue from this two percent increase 
in the Hotel Tax would be sufficient to cover the costs of 
the expansion of Moscone West. Although these Hotel Tax 
revenues cannot be specifically dedicated for this purpose, 
Mr. Tom advises that the City's Hotel Tax has generated 
the following amounts of revenue for the City over the 
past five years: 

Two Percent 
Total 14% Hotel of Hotel Tax 

Fiscal Year Tax Revenues (mills) Revenues (mills) 
1995-96* $103.0 NA 

1996-97* 137.6 (estimated) $18.0 

1997-98 152.4 21.8 

1998-99 161.5 23.1 

1999-2000 182.1 26.0 

*Rate increased to 14% in August of 1996. 

As indicated above, the additional two percent of Hotel 
Taxes has, over the past three years, generated more than 
twice the required average annual debt service expenses 
of $9,682,511. 

Recommendation: Approve the proposed ordinances. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Attachment I 



Moscone Center Expansion Project 
Estimated Project Budget and Funding Sources 

Vmjecr Cnrrmnnr~ir Hrv CrmTnTiiirion RrmH Bmnfim 


Tnf-al 


Project and Construction Management S 

P rec onstroction; 

Engineenng, Design, and Inspections 
Environmental Reviews and Permits 
An Design, Construction, and Administration 
Site Acquisition and Relocation 
Misc. Consultant, Staff, Administrative Fees 
and Permits 

Subtotal Preconstruction 

Construction; 

Demolition, Excavation, Shoring, and 
Toxics Abatement 

General Construction Contract 

Construction Contingency 

Offsite Infrastructure 

Furnishings, Fixtures &Eauioment 
Subtotal Construction 

Total S 


17,497,000 

15,375,000 

526,000 

2^62,000 

110,360,000 

3.687.000 
132,510,000 

8,450,000 
36,610,000 
17,160,000 

4,868,000 

8.400.000 
75,488,000 

225295.QC0 


S 


- 


S 17,497,000 

15,375,000 

526,000 

2^62,000 

110,360,000 

3.687,000 




133,000,000 


D2,3 10,000 

8,450,000 

169,610,000 

17,160,000 

4,368,000 

8.400.000 


s 


133, 000,000 
133.000.000 


208,488,000 
S 358295.000 



Attachment II 



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Attachment III 
Page 1 of 5 
REVISED 



City and County of San Francisco 
Mayor's Office of Public Finance 

Memorandum 



TO: DEBEA NEWMAN 

FROM SARAH HOLLENBECK 

RE: MOSCONE CENTER EXPANSION PROJECT FINANCING 

DATE: SEPTEMBER 28, 2000 



Per your request, below is an explanation of the variable rate structure that we have proposed for the 
issuance of the City and County of San Francisco Finance Corporation Lease Revenue Bonds, Series 2000 
(Moscone Center Expansion Project) as well as a discussion of the advantages, disadvantages, and 
mitigations of risks associated with variable rate debt. 

Proposed Bond Structure 

We are proposing that the City, though the City and County of San Francisco Finance Corporation, issue 
the lease revenue bonds for Moscone West under a multi-modal structure, meaning that the 
documentation allows for bonds to be marketed in a variety of short-term interest rate modes or as fixed 
rate bonds. At present, we expect the bonds will be initially issued in a weekly interest rate mode. The 
purpose of this memo is to provide you with some background lnformauon regarding variable rate bonds, 
specifically in the weekly mode, and to explain why we believe a variable rate structure is appropriate and 
advantageous for this financing. 

What are Variable Rate Bonds? 

The fundamental difference between fixed and variable rate bonds is when and how the interest rate paid 
on the bonds is determined In either case, the bonds are issued with a given final maturity, frequenuy 20 
to 30 years in the case of lease revenue bonds. In other words, in each instance the debt is long term debt. 
With fixed.rate bonds, the interest rate on the bonds is determined for the life of the issue at the time the 
bonds are sold. In the case of variable rate bonds, while still 30 year bonds, for example, the interest rate 
paid with respect to the bonds is reset at a given interval, such as every week or every day. Investors who 
purchase these bonds have the option to "put" their bonds back each time the interest rate is reset. When 
this occurs, a remarketing agent "remarkets" those bonds to other investors, adjusting the rate if necessary 
to attract buyers. 

Advantages of Variable Rate Debt 

The primary advantage of issuing debt in a variable mode is to take advantage of the relatively lower short 
term interests rates. A historical comparison of two national indices, one representing interest rates on 
long term debt (the Revenue Bond Index or "RBI") and the other representing rates on weekly variable 
rate debt (the Bond Market Association Index or "BMA" 1 ), shows that over the last five years weekly rates 



1 The Bond Market Association (BMA) is an international trade association of banks and broker/ dealers 
in U.S. securities including municipal securities. The BMA Municipal Swap Index, conceived in 1989, is 
comprised of a broad list of short-term municipal securities across the nation. At any given time, it 
represents an average of approximately 250 separate tax-exempt variable rate demand notes (VRDNs) 



Attachmen t III 

Page 2 or. 5 

REVISED 

have averaged 3.54% versus 5.77% for long term rates. Over a ten year period the averages have been 
3.51% and 6.19%, respectively. While short term rates are not always lower than long term rates, they 
have historically been significantly lower most of the time, and many issuers choose to issue debt in a 
variable mode as a way to minimize their long term cost of borrowing. In the context of the Moscone 
project, which will be a general fund lease obligation, a lower cost of borrowing means less debt service to 
be paid from the general fund. 

Variable rate debt offers several other advantages in the context of the Moscone financing. A variable rate 
structure enables the Qty to maximize the proceeds of the SI 57. 5 million in bonds that will be available 
for construction. One reason for this is that unlike fixed rate lease revenue bonds, the market does not 
always require a reserve fund under a variable rate structure. Instead, the bonds would be secured by 
bond insurance and the City would have a liquidity provider in place to ensure there would be a purchaser 
of the bonds in the event a significant amount of bonds were put and the remarketing agent were unable 
to place them with investors. The ability to issue these bonds without a cash reserve fund increases the 
proceeds available for construction by roughly S10 million. 

Also, as you know, in a lease transaction where the Gty does not have use of the subject asset until the 
completion of construction, the Qty borrows, or capitalizes, the interest due to the bondholders during 
that period. In the case of Moscone West, interest will be capitalized for 33 months. Because in a variable 
mode we can anticipate paying a lower rate of interest than with long term fixed rate debt, the amount of 
interest that must be capitalized is lower. A fairly conservative method of sizing of the capitalized interest 
needed to pay 33 months of interest on the bonds is to base the assumed interest rate on a 15C% of the 
two-year historical BMA average. This translates to a rate of approximately 5%, as opposed to the 
estimated 5.45% we would expect to pay on fixed rate debt. 

The table on the following page provides a comparison of the expected sources and uses of funds in a 
variable versus a fixed rate issue for the Moscone project. 



nationwide and is based off of Municipal Market Data's tracking of over 10,000 VRDNs. The BMA re- 
sets every Thursday. 



Attachment III 
Page 3 ot i 
REVISED 





Mos 
Com; 


cone Center Expansion Project 
jarison of Financing Alternatives 












Fixed Rate 




Variable Rate 




Difference 


Par Amount 




S 


157,500,000 


$ 


157,500,000 


$ 


- 


Project Fund Deposit 
Capitalized Interest Fund Deposit 
Reserve Fund Surety Premium 
Underwriter's Discount 
Liquidity & Remarketing Fees 
Costs of Issuance 




$ 


129,978,205 

23,605,313 

300,848 

1,575,000 

2.040,634 


$ 


133,227,110 

21,742,875 

263,994 

297,476 

1.968,545 


S 


3,248,905 

(1,862,438) 

(300,848) 

(1,311,006) 

(72,089) 


Total 




$ 


157,500,000 


$ 


157,500,000 


$ 


- 


Average Annual Debt Service 1 




s 


11,140,432 


$ 


9,682,511 


s 


(1,457,921) 


' After capitalized interest period 

















As you can see, the variable rate scenario produces approximately $3.2 million in additional proceeds for 
construction of the project and requires approximately SI. 8 million less in capitalized interest. Debt 
service payments after the capitalized interest period are expected to be $1.45 million lower than fixed 
rate, assuming an average variable rate of 3.91%, which represents the BMA average from 1990 to 2000 
adjusted for certain ongoing fees (remarketing and liquidity fees) in connection with the variable rate issue. 
The value of a $1.45 million annual debt service savings would be approximately $50 million gross value 
and $26 milli on present value (2000 dollars) over the 30 year life of the issue. 

In addition to a lower initial deposit to the capitalized interest fund with variable rate debt, as noted above 
the s izin g of the fund is based on what we believe to be a conservative assumption of 5% and we expect 
the City will in fact pay less than the assumed rate over the 33 months of construction. To the extent this 
is the case, the City has the ability to utilize excess proceeds in the capitalized interest fund for 
construction. If the Gty pays an average interest rate of approximately 4% rather than 5% on the bonds 
during construction, roughly an additional $3.5 million of proceeds (exclusive of interest earnings) would 
be available to fund project costs. 

Disadvantages of Variable Rate Debt 

While variable rate debt clearly offers a number of potential advantages over fixed rate debt, it has 
disadvantages as welL Significant among them is the fact that while short term rates have historically been 
lower than long term rates, there is no guarantee that they will be lower than either 1) long term rates in 
the future, or 2) the long term rates we could lock in today if we were to issue the Moscone bonds on a 
fixed rate basis. 

The Mayor's Office of Public Finance does not represent that historical rates are a reliable predictor of 
future rates. Historical rates can only provide a context for evaluating interest rate risk. In the last ten 
years there has been only one year during which short term rates, as represented by the BMA index, were 
higher on average than the estimated long term rate at which we would anticipate issuing fixed rate bonds 
for the Moscone project. For purposes of this analysis we have assumed the fixed rate bonds would be 
issued at a rate of 5.45%. The table on the following page shows average weekly variable rates over the last 
ten years as compared with today's estimated fixed rates. 



Attachment III 
Page 4 of 5 
REVISED 





Comparison of BMA Average 






vs. Current Fixed Rates 






BMA 


Spread to 


Current 


Year 


Average 


Fixed Rate of 5.45% 


1990 


5.91% 




0.46% 


1991 


437% 




-1.08% 


1992 


278% 




-2.67% 


1993 


2.38% 




-3.07% 


1994 


2.85% 




-2.60% 


1995 


3.85% 




-1.60% 


1996 


3.43% 




-2.02% 


1997 


3.66% 




-1.79% 


1998 


3.43% 




-2.02% 


1999 


327% 




-2.18% 


2000* 


4.01% 




-1.44% 


* Data through 9/13/00 







Another consideration with respect to variable rate debt, which is suggested by the data above, is interest 
rate volatility. Rates on bonds in a weekly interest rate mode can swing significantly from week to week. 
There are certain periods each year, such as quarter ends and tax time, when rates traditionally do spike 
up, but spikes up or down may occur at other times also in response to supply/demand imbalances in the 
market or a variety of other factors. With a variable rate program, an issuer cannot be certain of its annual 
debt service obligations in advance. This presents a challenge in terms of budgeting for such debt service. 
A variable rate issuer must have an ability and willingness to tolerate some degree of volatility in its debt 
portfolio. 

Other factors to consider in the variable rate context include remarketing risk, renewal risk associated with 
the liquidity facility, and credit risk associated with the credit enhancement providers (the bond insurer 
and liquidity provider). Remarketing risk refers to the risk that the agent or agents who are responsible 
for placing the bonds with investors on an ongoing basis will be unable to find buyers for the bonds. 
Renewal risk relates to the fact that liquidity facilities or lines of credit generally carry a term shorter than 
the term of the bonds. Commonly they are available for a maximum term of five years. At the rimp the 
facility must be replaced there may be no providers willing to offer a facility for the bonds or the cost of 
the facility may have increased significantly. Credit risk in the variable rate context has to do with the fact 
that short term debt trades primarily based on the ratings of the insurer and liquidity provider, particularly 
the short term ratings of the liquidity provider. Such debt is therefore subject to risk that the insurer or 
liquidity provider could be downgraded Were that to occur, the rates at which the bonds could be 
remarketed would likely increase, reflecting the diminished credit quality of the credit enhancement or 
liquidity provider. 

Mitigation of Risks Associated with Variable Rate Debt 

We believe the risks associated with variable rate debt can be mitigated sufficiently for the City to be 
comfortable assuming the relatively limited amount of variable rate exposure represented by the proposed 
Moscone financing. 



4 

1Q 



Attachment III 
Page 5 of 5 
REVISED 



In regard to the issue of interest rate volatility with variable rate debt, the Moscone financing lends itself 
to a variable rate structure given that the budgetary source of revenue for the payment of debt service on 
these bonds is the 2% Hotel Tax increase passed in 1996, which itself is a variable revenue stream. While 
the rates on the bonds will be floating up and down with market fluctuations, the hotel tax revenues will 
also be fluctuating both in amount received and in terms of rate of return generated once they are invested 
in the City treasury. Additionally, we would propose that the City budget the debt service on these bonds 
using a conservative estimate such as that used to oize the capitalized interest fund, Le., a rolling historical 
average plus a comfortable margin of error, to mitigate the possibility that the City would ever appropriate 
insufficient debt service to cover the actual liability with respect to these bonds. 

Liquidity facility renewal risk is mitigated by the fact that our agreement with our liquidity bank provides 
what is known as an "evergreen" provision under which the City can request annually an extension of the 
facility for a term of not less than one year. It is unlikely, therefore, that the City would find itself near the 
end of the term of its facility without a 12-month period in which to seek a different bank or change 
interest rate modes. 

With regard to credit risk in respect of variable rate bonds, we have selected a bond insurer which carries a 
AAA-rating and a liquidity bank which carries AA long-term ratings and the highest short term ratings by 
all three of the major rating agencies. In addition, the City will have the ability to replace the liquidity 
bank at any time, so that if its ratings were downgraded we could seek an alternate bank. 

Remarketing risk is mitigated in a variety of ways. First, our agreement with our remarketing agents is 
unique in that it requires them to hold, or "warehouse," our bonds for up to 30 days if they are unable to 
place them with investors. This provides them with incentive to place the bonds and also protects us 
from having to draw on our liquidity facility. Secondly, the purpose of the liquidity facility is to ensure 
that in the event of a failed remarketing, the liquidity bank will be in place to purchase the bonds and hold 
them until they can be remarketed It is very rare that a liquidity facility is ever drawn upon. A failed 
remarketing of the bonds is likely only to occur in the event of a major disruption in the financial markets. 
Even in the case of Orange County's bankruptcy, the remarketing agents either placed the county's 
variable rate bonds with new or existing investors or held them in inventory (as a warehouse) until 
investors were again willin g to purchase them. (We don't expect the City to present our remarketing 
agents with such a challenging situation!) 

Other California Issuers of Variable Rate Debt 

Many other municipalities in California issues some portion of their debt as variable rate and the rating 
agencies have indicated that they are comfortable with issuers holding up to 20% of their portfolio in a 
variable mode. Other California issuers of variable rate debt include: 

• State of California • City of Los Angeles 

• San Diego County • City of San Diego 

• Los Angeles County • City of San Jose 



I hope this information is helpful to you. I look forward to discussing this project with you and will be 
happy to answer questions regarding the bonds, debt structure, or other matters at your convenience. I 
can be reached at 554-6240. 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

Item 9 - File 00-1531 



Department: 

i 

Item: 



Location: 



Port 



Resolution approving Lease with Rincon Park Restaurants, 
LLC, and the City and County of San Francisco, operating 
by and through the San Francisco Port Commission, for the 
development of the Rincon Park restaurant site. 

Rincon Park on The Embarcadero, between Folsom Street 
and Harrison Street 



Purpose of Lease: 



Description: 



Ground Lease for 20,000 square feet of Port-owned 
property. The Port has entered into a Development 
Agreement with Rincon Park Restaurants, LLC, for the 
construction and operation of a two-building development 
consisting of two restaurants and a central outdoor dining 
and circulation space on the subject property. All 
construction costs would be the responsibility of the tenant, 
subject to the rent credit provisions described below. The 
Ground Lease would cover the subject property and the 
tenant improvements. 

Charter Section 9.118 requires that the Board of 
Supervisors approve non-maritime leases of real property 
or contracts and agreements entered into by a City 
Department extending for a period of ten years or more. 
The proposed resolution would approve a Lease of up to 50 
years between the Port and Rincon Park Restaurants, LLC 
(see below). The Port proposes to enter into a Development 
Agreement with Rincon Park Restaurants for the 
construction of two restaurants, totaling 12,000 square feet 
of ground floor space, plus an outdoor eating area, totaling 
8,000 square feet of space, in the Rincon Park, located on 
The Embarcadero near Folsom Street. According to the 
Port, one of the two proposed restaurants would be an 
Italian restaurant and the other restaurant would be a 
French restaurant. The Development Agreement between 
the Port and Rincon Park Restaurants identifies the scope 
of the development project and includes a schedule of 
performance, indemnification requirements, and other 
issues related to the construction phase of the project. 
Rincon Park Restaurants would be responsible for all 
construction costs less any rent credits granted by the Port 
under the terms of the Ground Lease. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Actual construction of the two restaurants is scheduled to 
begin in September of 2001, after the Port has approved the 
financing, design, and construction plans submitted by the 
developer 1 . The Port expects that the project will be 
completed in August of 2002. The Development Agreement 
expires upon the completion of the construction project. 

The Ground Lease Agreement would be subject to the 
provisions of the Development Agreement until the 
completion of the project, scheduled for August of 2002. 
The proposed Ground Lease establishes the terms and uses 
for the Rincon Park Restaurants and identifies the specific 
compensation and other requirements for the parties to the 
Lease. The Ground Lease would commence after the Port 
issues to the tenant the Certificate of Completion of the 
construction project, or earlier, if the Port issues a 
temporary certificate of occupancy, as noted previously and 
could extend for a period of 50 years. Section 3 of the 
State's Burton Act authorizes the Port Commission to enter 
into leases with terms not exceeding 66 years (see 
Comment 13), and the proposed resolution states that the 
Ground Lease is for a term not exceeding 66 years. Under 
the terms of the Ground Lease, the subject property plus 
improvements would revert to the Port after 50 years 
without further compensation to the tenant. Therefore, the 
subject resolution should be amended to approve a lease not 
exceeding 50 years. 

Under the proposed Ground Lease, the tenant would be 
responsible for all of the costs required for managing, 
improving, operating, maintaining, and repairing the 
subject property. The Ground Lease provides that the 
tenant must maintain and repair the property, at its own 
cost, in "first-class" condition and must make all repairs 
promptly. The Port would continue to own the property 
and at the conclusion of the 50-year Ground Lease, the 
responsibility for the management, operation and 
maintenance of the property and all improvements would 
revert back to the Port. 






1 Under the Development Agreement and the Ground Lease, the developer and the tenant 
are the same entity (Rincon Park Restaurants, LLC). 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

In January of 1981, the Board of Supervisors and the 
Redevelopment Agency adopted the Rincon Point - South 
Beach Redevelopment Plan, to develop a park along the 
Embarcadero between Howard and Harrison Streets which 
would include 12,000 square feet of restaurant space. In 
January of 1995, the Redevelopment Agency issued a 
variance to the Redevelopment Plan to increase the 
proposed restaurant space from 12,000 square feet to 
20,000 square feet. In June of 1995, the Port Commission 
entered into an Agreement to Lease with the 
Redevelopment Agency for Rincon Park. The Port reserved 
the restaurant site from the Agreement to Lease, and 
agreed that no more than 12,000 square feet of the 20,000 
square feet of space reserved for the restaurant would 
consist of the restaurant building, and the additional 8,000 
square feet of space would be used for an outdoor dining 
area and restaurant-related uses. 

The Port issued a Request for Proposal (RFP) in July of 
1998 for the opportunity to develop a restaurant in Rincon 
Park. The Port selected Nice Ventures, Inc., based on their 
experience, concept and design for the restaurants, 
financial plan, and higher rent revenue to the Port over the 
long-term of the Lease, and in March of 1999 the Port 
entered into an "exclusive right to negotiate agreement" 
with Nice Ventures. The attached memorandum 
(Attachment I), provided by the Port, explains the Port's 
evaluation of the two respondents to the RFP and the 
reasons for selecting Nice Ventures. During the exclusive 
right to negotiate period, the Port and Nice Ventures 
negotiated the proposed Development Agreement and the 
Ground Lease, and developed the standards and 
requirements of the restaurant project, including the 
performance schedule. Nice Ventures, Inc refined the 
design concept and scope of the project, and formed a 
limited liability company, the Rincon Park Restaurants, 
LLC, to pursue the restaurant project. On July 25, 2000, 
the Port Commission approved the modifications and 
clarifications of the Waterfront Plan's Design and Access 
Element in regard to the Rincon Park Restaurants project, 
and approved the form and substance of the Development 
Agreement and the Ground Lease (Resolution 00-60). 

Approval of the proposed resolution would approve the 
Ground Lease and the Development Agreement, to the 

BOARD OF SUPERVISORS 
BUDGET ANALYST 






Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Lessor: 
Lessee: 
No. of Sq. Ft. 



Development 
Agreement: 



Ground Lease: 



extent that the Development Agreement is incorporated or 
referenced in the Ground Lease. The Development 
Agreement is not subject to Board of Supervisors approval 
because it is for a term of less than 10 years, and does not 
anticipate that the Port will receive in excess of $1,000,000 
in revenues. 

Port of San Francisco 

Rincon Park Restaurants, LLC 

20,000 square feet site area, which includes 12,000 square 
feet of ground floor restaurant space in two buildings and 
8,000 square feet of outdoor dining space 



The proposed Ground Lease describes the rights and 
obligations of the Port and the tenant during the Term of 
the Lease. The Ground Lease would be subject to the 
provisions of the Development Agreement until the 
completion of the construction project, with a target 
completion date of August 15, 2002, a period of 
approximately 22 months. 

An initial term of 25 years with five successive five-year 
options to extend, totaling 25 years, for a potential 
maximum term of 50 years, as follows: 

• The initial Term of Lease is 25 years from the date of 
the Certificate of Completion of the construction project, 
with a target date of August 15, 2002. The Ground 
Lease would commence earlier if the Port grants to the 
tenant a temporary certificate of occupancy, that 
permits the tenant to occupy the buildings for the 
purpose of training employees and preparing for the 
restaurants' openings. The initial Ground Lease would 
extend from Year 1 through Year 25. 

• At the expiration of the initial Ground Lease after Year 
25, the tenant would have the option to extend the term 
of the Lease under the First Tier Options to Extend for 
three successive periods of five years each, for a total of 
15 years. The First Tier Options to Extend would 
extend from Year 26 through Year 40. 

• After the expiration of the First Tier Options to Extend 
after Year 40, the tenant would have the option to 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



extend the term of the Lease under the Second Tier 
Options to Extend for two successive periods of five 
years each, for a total of 10 years. The Second Tier 
Options to Extend would extend from Year 41 through 
Year 50. 

In summary, if all options were exercised, the lease 
would have a total term of 50 years. 



Development 
Agreement Fee: 



Rincon Park Restaurants would pay $5,000 per month to 
the Port under the Development Agreement for the period 
from the effective date of the Agreement until the close of 
escrow in approximately July, 2001, a period of nine 
months, for a total fee of $45,000. The close of escrow 
would be the date by which the tenant had obtained the 
necessary financing, insurance, and construction 
documents for the construction project, subject to Port 
approval. At the close of escrow, the Port would deliver the 
site to the tenant. 



Construction 
Period Rent: 



Annual Minimum 
Rent: 



The construction period would begin at the close of escrow 
and upon delivery of the site by the Port to the tenant in 
approximately July, 2001. During the period of 
construction, from approximately July, 2001 through the 
targeted completion date in August, 2002, a period of 13 
months, the tenant would pay $5,000 per month in 
construction period rent to the Port, for a total construction 
period rent of $65,000. The total rent paid by the tenant to 
the Port during the escrow and construction period, 
including the development agreement fee ($45,000) and the 
construction period rent ($65,000), would be $110,000. 



The tenant would begin to pay minimum rent to the Port 
when the construction project is completed and the Port 
issues a Certificate of Completion to the tenant, or earlier, 
if the Port issues to the tenant a temporary Certificate of 
Occupancy prior to the completion of the construction 
project. The annual minimum rent would be $200,000, 
payable in equal monthly installments of $16,667. 

The tenant would be required to pay the greater amount of 
either the minimum rent or the percentage rent as 
described below. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Percentage Rent: 



Adjustments to 
Annual Minimum 
Rent: 



The percentage rent for the Ground Lease would be equal 
to 3 percent of monthly gross receipts. For example, if 
monthly gross receipts were equal to $1,000,000, monthly 
percentage rent payable would equal $30,000 (3 percent of 
$1,000,000), which would be $13,333 greater than the 
$16,667 minimum rent. Gross receipts are defined as all 
receipts from sales and business transacted in the two 
restaurants, including receipts from catering services. 



During the initial 25-year term, the minimum rent is 
adjusted upward by 3.33 percent each year on the 
anniversary date of the annual minimum rent 
commencement date. 



Adjustments to 
Minimum and 
Percentage Rent if 
Lease is Extended: 



In Year 26, if the tenant exercises the option to extend the 
lease under the First Tier Options to Extend provision, 
then both the minimum annual rent and the percentage 
rent would be adjusted to the fair market rental for a 
ground lease of unimproved land at the time that the lease 
is extended. Fair market rent would be based on the 
prevailing ground lease rents by public and private 
landlords for comparable properties. 

In Year 41, if the tenant exercises the option to extend 
under the Second Tier Options to Extend provision, then 
the minimum annual rent and percentage rent would be 
adjusted to the fair market rental of the ground lease and 
for the improvements in their "as-is" condition. Fair 
market rent would be based on prevailing rents by public 
and private landlords for comparable single-tenant retail 
commercial leases. 



The First Tier Options to Extend is for three successive 
periods of five years, totaling 15 years, from Year 26 
through Year 40. As noted above, if the tenant exercises 
the option to extend under the First Tier Options to 
Extend, the rental rate would be increased to fair market 
value for comparable unimproved land in Year 26 (see 
Comment 7). Under the First Tier Options to Extend, from 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

Year 27 through Year 40, the minimum annual rent would 
be increased annually from the fair market value rate that 
was applied in Year 26. The minimum annual rent would 
be increased by the percentage increase in the Consumer 
Price Index (CPI), but no more than 3.33 percent. 

The Second Tier Options to Extend is for two successive 
periods of five years, totaling 10 years. As noted above, if 
the tenant exercises the option to extend under the Second 
Tier Options to Extend, the rental rate would be increased 
in Year 41 to the fair market value for comparable 
unimproved land plus the tenant structures (see Comment 
7). Under the Second Tier Options to Extend, from Year 42 
through Year 50, the minimum annual rent would be 
increased annually from the fair market value rate that 
was applied in Year 41. The minimum annual rent would 
be increased by the percentage increase in the CPI but no 
more than 3.33 percent. 

Rent Credits: Under the Ground Lease, the Port would grant rent credits 

to the tenant, for a total amount not to exceed $759,000, for 
costs incurred by the tenant for development of the site as 
follows: 

(a) Investigating and remediating hazardous materials on 
the site for an amount not to exceed $250,000; 

(b) Obtaining an engineering report on the geotechnical 
surface and subsurface conditions of the proposed 
property for an amount not to exceed $20,000; 

(c) Installing pilings for the foundation of the building 
project, if necessary, for an amount not to exceed 
$369,000; and 

(d) If necessary, grading to the elevations and installing 
utilities hook-ups, consistent with certain Waterfront 
Transportation Project drawings, removing an 
abandoned water main line, and installing limited 
parking or loading curb designations, for an amount not 
to exceed $120,000. 

Under the terms of the Lease, the tenant may earn rent 
credits at the rate of 50 percent of the total percentage rent, 
but, as noted in the sample below, the rent credits are only 
applied to the amount of rent exceeding the $200,000 
minimum rent. The table below provides an example of the 
application of the rent credit. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Total annual percentage rent (3 percent 






of gross receipts) 


$500,000 




Less minimum annual rent 


200.000 




Total percentage annual rent in excess of 






Minimum rent 




300,000 


Less the rent credit (50 percent of total 






Percentage rent of $500,000) 




250,000 


Percentage rent owed in excess of 






Minimum rent and rent credit 




$50,000 



Using the example shown above, total rent owed, after the 
rent credit was applied, would be $250,000, which would 
include the $200,000 minimum annual rent plus $50,000 in 
percentage rent in excess of the minimum rent and the rent 
credit. 

Under the proposed agreement, if total rent credits are 
greater than the amount of percentage rent, including 
minimum rent, owed by the tenant to the Port, then the 
rent credit balance would be carried over to the following 
year. For instance, if the total percentage rent were equal 
to $350,000, then the rent credit could not exceed $175,000 
(50 percent of $350,000). However, the amount of 
percentage rent owed which exceeds minimum rent of 
$200,000 would be $150,000 ($350,000 percentage rent less 
$200,000 minimum rent), which is $25,000 less than the 
rent credit of $175,000. Therefore, a rent credit balance of 
$25,000 would be carried over into the next year. 

Rent credits, in addition to the rent credits noted above for 
the development of the site, may be granted by the Port 
under certain circumstances. The tenant would receive a 
rent credit, as follows: 

(a) if the Port's use of the subject property causes damage 
to the site, for an amount equal to the actual damage; 

(b) if an audit conducted by a City or Port auditor reveals 
that the tenant has overstated gross sales and has 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



overpaid the percentage rent to the Port, for an amount 
equal to the overpayment; 

(c) if the tenant has to obtain an appropriate bond to 
remove any title defect caused by the Port 2 , for an 
amount equal to the bond; 

(d) if an action of the Port causes a delay in the tenant's 
construction project of greater than 15 days, for an 
amount equal to the development agreement fee for that 
month; or 

(e) if the Port should fail to perform or comply with its 
obligations under terms of the Lease, causing damage 
to the tenant. Examples of such failure to perform or 
comply with the Port's obligations include the Port's 
unreasonable withholding of consent to any subsequent 
construction on the property which conforms to the 
Lease. The rent credit would be equal to the amount of 
the actual damages. 



Comments: 1. The Budget Analyst notes that the Ground Lease 

provides for rent credits up to $759,000, and therefore, the 
projected annual rents would most likely be less than those 
provided by the Port, depending upon the actual amount of 
the rent credits granted by the Port to the tenant. Ms. Kari 
Kilstrom of the Port states that the rent credits would most 
likely be applied to the rent in the first two to three years of 
the Ground Lease. 

2. According to Ms. Kilstrom, the Port estimates total 
percentage rent of $500,000 per year, increasing to 
approximately $900,000 per year over the next 20 years 
based upon the developer's revenue projections for the two 
restaurants. Ms. Kilstrom estimates that the average 
annual rental payments to the Port net of the rent credits 
would be approximately $700,000, and the total rent to the 
Port over the 25-year term of the initial Ground Lease net 
of the rent credits would be $17,500,000. Ms. Kilstrom 
states that the Port is unable to estimate rental payments 
beyond the initial 25-year term of the lease because the 
rent will be re-appraised to fair market value at that time. 



2 A title defect would include the possession or right of possession to the property by parties 
other than the Port or the tenant, or a hen against the property. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



3. Ms. Kilstrom reports that the Port's analysis of 
restaurant revenues for comparable restaurants 
(Attachment II) is consistent with the developer's revenue 
projections. As shown in Attachment II, anticipated 
restaurant revenues in the first year of operation would be 
$15,534,000, -which would result in annual percentage rent 
of $466,020 (three percent times $15,534,000). 

4. Ms. Kilstrom states that the developer of the Rincon 
Park Restaurants project must satisfy certain conditions 
stated in the Development Agreement prior to the 
execution of the Ground Lease, which includes: (a) approval 
by the Port of all construction documents and issuance of a 
building permit; (b) obtaining all regulatory approvals for 
the project; (c) approval by the Port of the developer's 
budget, financing plan, and completion guaranty to the 
extent such guaranty is required by the lender; (d) approval 
by the Port of the construction contract between the 
developer and the contractor; (e) vacation of certain City 
streets; (f) evidence of compliance with certain City 
ordinances, including diversity, non-discrimination, and 
card check; and (g) ability of the Port to deliver possession 
and rights to the Restaurant site free of occupancy by 
others. According to Ms. Kilstrom, the proposed Rincon 
Park Restaurants project is part of the Embarcadero 
Roadway project, which is managed by the Department of 
Public Works (DPW). Ms. Kilstrom states that DPW will 
submit legislation to the Board of Supervisors for vacation 
of City streets for the project. 

5. According to Ms. Kilstrom, the proposed rent represents 
fair market value. Ms. Kilstrom states that fair market 
value is based upon an appraisal of the subject site 
performed by Clifford Associates in July of 1998 and 
updated in June of 2000. 

6. Ms. Kilstrom states that the Port is entering into a 50- 
year lease with Rincon Park Restaurants (25-year initial 
Ground Lease plus options to extend, totaling 25 years) 
because (a) the Rincon Park Restaurants have requested a 
50-year lease in order to obtain financing and (b) the 
standard lease for comparable developments, including 
extensions, is 50 years. Ms. Kilstrom reports that the 
construction project is expected to cost from approximately 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



$8,000,000 to $10,000,000, to be paid fully by Rincon Park 
Restaurants. 

7. As noted above, if the tenant exercises the First Tier 
Options to Extend, which extends from Year 26 through 
Year 40, the rent shall be adjusted in Year 26 to fair 
market value for unimproved land. If the Port and tenant 
are not able to agree on the fair market value, then fair 
market value will be determined by impartial appraisers. 
If the tenant exercises the Second Tier Options to Extend, 
which extends from Year 41 through Year 50, the rent shall 
be adjusted in Year 41 to fair market value in the same 
manner as for the First Tier Options to Extend, except that 
the fair market value shall be determined for both the land 
and the improvements in their "as-is" condition. According 
to Ms. Kilstrom, the fair market value will be based upon 
both the land and the improvements under the Second Tier 
Options to Extend in Year 41, because the tenant 
improvements will be fully depreciated after 40 years, 
based upon standard accounting practices. 

8. Under the terms of the Ground Lease, the tenant would 
be required to pay possessory interest taxes upon the 
subject property. The Port estimates that such taxes would 
provide approximately $105,000 annuaUy in tax revenue to 
the City General Fund. 

9. The proposed Lease can be assigned by the existing 
tenant to a new tenant, with the consent of the Port. The 
new tenant would assume all the obligations of the existing 
tenant under the Lease, and the existing tenant would 
reimburse the Port for any legal expenses for the review of 
the assignment of the Lease to a new tenant. Additionally, 
the tenant may enter into subleases for the use of the 
property, subject to the Port's consent. The tenant would 
be required to assign sublease rents to the Port. 

10. Under the terms of the Lease, the improvements to the 
subject property would revert to the Port at the expiration 
of the Lease. During the term of the Lease, the tenant 
would be required to maintain and repair the subject 
property, including the improvements, at no cost to the 
Port. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

11. Any tenants or subtenants on the subject Port property 
would be required to pay prevailing wages to their 
employees, under the City's existing prevailing wage 
ordinance. 

12. The proposed project does not provide for parking. 
According to Ms. Kilstrom, the site is subject to the Rincon 
Point - South Beach Redevelopment Plan, which does not 
require off-street parking for restaurants. Ms. Kilstrom 
states that the proposed restaurant site is serviced by 
Muni's N-Judah streetcar line within The Embarcadero 
roadway. 

13. As noted previously, the proposed resolution states that 
the Ground Lease is for a term not exceeding 66 years. 
Under the terms of the Ground Lease, the subject property 
plus improvements would revert to the Port after 50 years 
without further compensation to the tenant. Therefore, the 
Budget Analyst recommends that the subject resolution be 
amended to approve a Ground Lease not exceeding 50 
years. 

Recommendations: 1. Amend the proposed resolution to provide for a Ground 
Lease for a term not exceeding 50 years, instead of not to 
exceed 66 years. 

2. Approve the resolution as amended. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

51 



Attachment I 



PORT OF SAN FRANCISCO 
MEMORANDUM 



Page 1 of 3 



TO: 


Severin Campbell 




Budget Analyst 


FROM: 


Kari Kilstrom 




Project Coordinator 


DATE: 


September 28, 2000 


RE: 


Rincon Park Restaurants 



On September 27, 2000 you asked for a memorandum from the Port describing the 
selection of Nice Ventures, Inc. through the Request for Proposals ("RFP") process 
including information about the two economic proposals and the consideration of 
economic return in the overall evaluation process. 

The Port's RFP issued in July 1998 indicated that the Port would select a Respondent that 
has the demonstrated ability to meet the project objectives (attached) and described eight 
(8) selection criteria used to evaluate the proposals. The RFP did not assign specific 
weights or points to any of the criteria. The RFP required a monthly Base Rent of at least 
$16,250 and Percentage Rent of at least three (3) percent based upon an appraisal of the 
fair market rental value of the proposed Restaurant Development Site prepared by 
Clifford Associates in July 1998 and provided to you earlier this month. The higher of 
the Base Rent or the Percentage Rent would be payable to the Port. 

The Port received proposals from Nice Ventures and from Phoenix Group. Port staff 
evaluated the two proposals using the selection criteria and summarized its evaluation in 
a memo to the Port Commission dated November 4, 1998 (attached) and concluded with 
a recommendation that the Port enter into exclusive negotiations with Nice Ventures. 
The Port found that the Nice Ventures proposal (including the design and development 
team, the restaurant operator, the restaurant concept and financial plan) surpassed the 
Phoenix Group proposal in responding to the selection criteria set forth in the RFP. Of 
particular note, the Nice Ventures proposal: 

• Demonstrated clearer lines of authority and assignment of responsibilities 

• Identified more readily available team members 

• More effectively demonstrated experience with and success of similar ventures 

• Demonstrated successful and established relationships with restaurant operators 

• Exhibited greater ability to implement development quickly and effectively 

• Demonstrated a more unique restaurant concept and better compatibility with the 



Attachment I 
Page 2 of 3 



neighborhood and Park 

• Included a superior conceptual design that best relates to the Park and the waterfront 
setting and encouraged freedom of movement between the restaurant and the Park 

• Demonstrated a greater ability to raise and commit capital for construction and 
operations of restaurant ventures 

• Was expected to achieve a higher overall return to the Port 

Both proposals projected average sales of approximately 520,000 per seat annually, 
however Nice Ventures' proposal included more indoor and outdoor seating and therefore 
projected gross sales at stabilization of $19.4 million as compared to the Phoenix Group 
projection of S9.8 million. Because the economic return to the Port is based in part upon 
a percentage of gross sales, Nice Ventures proposal was expected to achieve a higher 
overall return to the Port. 

Phoenix Group's proposal included a Percentage Rent rate of 3% which would yield an 
estimated $294,000 per year (based upon projected gross revenues of $9.8 million) in rent 
to the Port. No rent credits were proposed. Nice Ventures' proposal included a 
Percentage Rent rate of 6.25% accompanied by a Rent Credit of $654,276 per year for 25 
years, which would yield an estimated $558,224 per year in rent to the Port ($1,212,500 
Percentage Rent less $654,276 Rent Credit). As you know, the final business terms with 
Nice Ventures were negotiated to provide the Port with the appraised fair-market Ground 
Lease Percentage Rent rate of 3% which yields an estimated $582,000 per year (based 
upon projected gross revenues of $19.4 million) in rent to the Port. Rent credits are 
permitted for specific construction cost items only, not to exceed $759,000 in total for the 
life of the project. 

While economic return is important, it is only one of a number of other criteria that assess 
the developer's ability to successfully deliver and operate the project consistent with 
stated Port objectives. Another important consideration in the selection of Nice Ventures 
is that it is a locally owned business. Nice Ventures Inc. former and current restaurants 
include Restaurant Lulu, Cafe Marimba, Rose Pistola, Rose's Cafe and Black Cat. 

After considering the proposals and the staff analysis, the Port Commission approved the 
Exclusive Right to Negotiate Agreement with Nice Ventures on November 10, 1998. 

Please call me if you have any questions. 



cc/ Veronica Sanchez 
Anne Cook 
Stephanie Downs 
Dianne Millner 



SEP-28-2000 15=38 



SF PORT-PLANNING DIU. 



Attachment I 
Page 3 of 3 






EXHIBIT A 



PHOENIX 1 MCE VENTURES, INC. 


Projected Sales 
(stabilized Operation) 


S9.8 million 


SI 9.4 million** 


Number of Seats 


490 

Indoor 370 
Outdoor 120 


1,000 

Indoor 400 
Outdoor 600 


Square Feet 


12,000 


20,000' 


Average Sales/Seat 1 $20,000 1 SI 9,400 


Average SaIes/Sq.Ft. 


S816 I S970 



•Includes outdoor seating in the square footage 

** The projected sales presented by Nice Ventures, Inc. 

was $19.4 million. The Port projected sales of approximately 
$15.5 million, as shown in Attachment II. 






~Z~-^ =. 12 



MAY 14 '96 03=2bfiM 



P. 1/1 

Attachment II 



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N3 OS 



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2 


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Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

Items 10 and 13 - Files 00-1611 and 001614 

Departments: Mayor's Office of Public Finance 

California Academy of Sciences 

Items: Item 10, File 00-1611 

Resolution providing for the issuance of not to exceed 
$87,445,000 aggregate principal amount of General 
Obligation Bonds (California Academy of Sciences 
Improvement Bonds, 2000); authorizing the execution, 
authentication and registration of said bonds; providing 
for the levy of a tax to pay the principal and interest 
thereof; providing for the appointment of depositories and 
other agents for said bonds; providing for the 
establishment of accounts related thereto; ratifying 
certain actions previously taken; and granting general 
authority to City officials to take necessary actions in 
connection with the sale and delivery of said bonds. 

Item 13, File 00-1614 

Resolution authorizing and directing the sale of not to 
exceed $15,095,000 in General Obligation Bonds 
(California Academy of Sciences Improvement Bonds, 
2000), Series 2000G; prescribing the form and terms of 
said bonds; authorizing the execution, authentication and 
registration of said bonds; providing for the appointment 
of depositories and other agents for said bonds; providing 
for the establishment of accounts related thereto; 
approving the forms of official notice of sale and notice of 
intention to sell bonds; directing the publication of the 
notice of intention to sell bonds; approving the form and 
execution of the official statement relating thereto; 
approving the form of the continuing disclosure 
certificate; approving modifications to documents; 
ratifying certain actions previously taken; and granting 
general authority to City officials to take necessary 
actions in connection with the sale and delivery of said 
bonds. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

Amount: 



Description 


Amount 


Item 10, File 00-1611 

Authorization for the Issuance of California 
Academy of Sciences Improvement Bonds 


$87,445,000 


Item 13, File 00-0614 

Authorization for the Sale of the Initial Series of 
the above California Academy of Sciences 
Improvement Bonds, Series 2000G 


$15,095,000 



Description: 



On March 7, 2000, San Francisco voters approved 
Proposition B, which authorized the City to issue up to 
$87,445,000 in general obligation bonds, known as the 
California Academy of Sciences Improvement Bonds, to 
finance capital improvements to the California Academy 
of Sciences (the "Academy"), located in Golden Gate Park. 

Item 10, File 00-1611, would establish the general terms 
and procedures for the issuance of the $87,445,000 in 
California Academy of Sciences Improvement Bonds. Item 
13, File 00-1614, would provide specific approval to sell 
the initial series (Series 2000G) of the subject bonds, in an 
aggregate principal amount of up to $15,095,000. 



Item 10. File 00-1611 

The proposed resolution would authorize the issuance of 
an aggregate principal amount not to exceed $87,445,000 
of California Academy of Sciences Improvement Bonds, 
2000 to finance capital improvements to the Academy. 

General provisions regarding the proposed issuance of the 
California Academy of Sciences Improvement Bonds are 
as follows: 

• The bonds shall be divided into series, as authorized 
by the Board of Supervisors. 

• An initial series of Bonds in the aggregate principal 
amount of up to $15,095,000 (Series 2000G) would be 
created and established (see below, Item 13, File 00- 
1614, for the specific provisions of the said series). 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Property taxes collected to redeem the bonds would be 
deposited in a special funds account, which would be 
created specifically for this purpose. 

The proceeds of the sale of the bonds would be 
deposited into a Project Account, maintained by the 
City Treasurer, and would be applied exclusively to 
the projects approved under the subject Bond. 

The City Treasurer may appoint fiscal agents or 
financial institutions to distribute bond interest and 
principal payments. 

The Board of Supervisors may, by resolution, 
authorize and direct the sale of any series of bonds to 
provide for the defeasance of such series bonds. 



Item 13. File 00-1614 

The proposed resolution would authorize and direct the 
sale of the initial series of the California Academy of 
Sciences Improvement Bonds, Series 2000G, in a 
principal amount not to exceed $15,095,000. The proposed 
resolution would also approve the form and terms of the 
documents and official notices related to the sale, and 
authorize City officials to take various actions necessary 
to carry out the sale of bonds. 

General provisions in the subject resolution regarding the 
sale of the bonds are as follows: 

• The sale of the bonds is tentatively scheduled for 
November 15, 2000. 

• The bonds would be sold at an interest rate not to 
exceed 12 percent per year and would have a final 
maturity in not longer than 25 years, or June 15, 2025. 

• An official statement describing the proposed bonds is 
referenced in the proposed resolution for approval by 
the Board of Supervisors. The official statement would 
be available to all potential bidders for the bonds. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



• Bonds would be awarded to the bidder whose bid 
represents the lowest total interest cost to the City. 

According to Ms. Alison Brown of the California Academy 
of Sciences, the total $87,445,000 in California Academy 
of Sciences Improvement Bonds approved by voters in 
March of 2000 will be used to help fund the expansion, 
renovation and seismic upgrade of the Academy facility. 
(The existing facility is 378,443 square feet and the 
expanded facility will be 428,443 square feet.) The 
estimated total cost of the project is approximately 
$230,000,000, which will be funded with: (a) the net 
proceeds of the $87,445,000 in California Academy of 
Sciences Improvement Bonds; (b) private financing in the 
amount of approximately $100,000,000 to be raised by the 
Academy through private contributions; (c) $28,000,000 in 
Steinhart Aquarium Improvement General Obligation 
Bonds approved by San Francisco voters in November of 
1995; and, (d) $15,000,000 in grant funds from the State 
of California, which the State has approved but the 
Academy has not yet received. 

Ms. Brown advises that the $15,095,000 authorized by 
Item 13, File 00-1614, in California Academy of Sciences 
Improvement Bonds, Series 2000G, would help to fund 
planning and initial construction costs of the Academy 
facility renovation project. According to Ms. Brown, the 
Academy began planning the project in September of 1999 
and since then has expended a total of approximately 
$5,000,000 on the project, which came from private 
financing secured by the Academy. Ms. Brown anticipates 
that the entire renovation project will be completed in the 
Spring of 2006. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

SQ 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Budget: 



The Academy proposes to expend the estimated 
$15,095,000 in proceeds from the California Academy of 
Sciences Improvement Bonds, Series 2000G, as follows: 



Project 


Amount 


General Construction 




Earthwork and Demolition 

Building Shell 

General Conditions (See Comment No. 2) 

General Contractors Overhead & Profit 

Project Scope Development Contingency 

(See Comment No. 2) 

Construction Contingency 

Escalation (See Comment No. 2) 


$2,691,000 
433,000 
593,000 
230,000 

598,000 
538,000 
880,000 


Subtotal General Construction 


$5,963,000 


Other Project Costs 




Hazardous Waste Mitigation Cost 

Permits & Fees (See Comment No. 2) 

Temporary Systems, Reclamation 

& Moving Costs 

Telecommunications & Security Systems 


1,250,000 
2,787,000 

4,500,000 
500,000 


Subtotal Other Project Costs 


$9,037,000 


Total Project Costs 


$15,000,000 


Cost of Issuing Bonds 


95,000 


Total Cost 


$15,095,000 



Comments: 



1. Including Items 11, 12, and 13, Files 00-1612, 00-1613, 
and 00-1614, of this report to the Finance and Labor 
Committee, the Mayor's Office of Public Finance proposes 
to sell general obligation bonds in a total amount not to 
exceed $46,215,000 on November 15, 2000. 



2. According to Ms. Brown, the $593,000 for General 
Conditions in the above budget refers to costs in addition 
to actual building costs, such as those related to health 
and safety, insurance and scaffolding. The budget 
includes $598,000 for a Project Scope Development 
Contingency since the Academy is still in the planning 
and design phase of the renovation project and, therefore, 
must account for adjustments in the design and scope of 
the project. The $880,000 in the above budget for 
Escalation is to account for inflation in project costs over 
the 6-year term of the project. According to Ms. Brown, 
the $2,787,000 in Permits and Fees in the above budget 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



60 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



includes project and construction management fees, civil 
and geotechnical engineering fees, as well as a variety of 
fees paid for inspections and permits. 

3. According to Ms. Karen Ribble of the Mayor's Office of 
Public Finance, after the sale of the California Academy 
of Sciences Improvement Bonds, Series 2000G, in an 
amount not to exceed $15,095,000 (Item 13, File 00-1614), 
the remaining amount of unsold California Academy of 
Sciences Improvement Bonds would equal $72,350,000. 

4. Under the proposed resolution (Item 13, File 00-1614), 
the annual interest rate for the $15,095,000 in California 
Academy of Sciences Improvement Bonds, Series 2000G, 
cannot exceed 12 percent. However, Ms. Ribble reports 
that if the bonds are sold in November of 2000, as is 
currently planned, the bonds would probably be sold at an 
overall effective interest rate of approximately 5.45 
percent. 

5. According to Ms. Ribble, the proposed sale of California 
Academy of Sciences Improvement Bonds, Series 2000G, 
in the amount of $15,095,000 for Item 13, File 00-1614, 
would result in a total debt service of approximately 
$24,547,116 ($15,095,000 in principal payments plus 
$9,452,116 in interest costs) over the 20-year life of the 
bonds. The average debt service payment per year would 
be approximately $1,227,355. 

6. Ms. Ribble states that the proposed sale of the total of 
$46,215,000 in general obligation bonds, for Items 11, 12, 
and 13, as noted in Comment No. 1 above, would result in 
a total debt service of approximately $75,153,351 
($46,215,000 in principal payments plus $28,938,351 in 
interest costs) over the 20-year life of the bonds. The 
average debt service payment per year would be 
approximately $3,757,668. 

7. For Item 13, File 00-1614, According to Ms. Peg 
Stevenson of the Controller's Office, the proposed sale of 
the California Academy of Sciences Improvement Bonds, 
Series 2000G, in the amount of $15,095,000, would result 
in an increase in the Property Tax rate of approximately 
$0.0015 per $100 of assessed value. At that rate, the 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



owner of a single family residence assessed at $400,000 
(after allowing for the Homeowner's Exemption Credit) 
would pay $6.00 in additional Property Taxes annually 
due to the sale of these bonds. 

8. Ms. Stevenson states that the proposed sale of a total of 
$46,215,000 in general obligation bonds, for Items 11, 12, 
and 13, as noted in Comment No. 1 above, would result in 
a total increase in the Property Tax rate of approximately 
$0.0047 per $100 of assessed value. At that rate, the 
owner of a single family residence assessed at $400,000 
(after allowing for the Homeowner's Exemption Credit) 
would pay $18.80 in additional Property Taxes annually- 
due to the sale of these bonds. 

9. As stated in the Attachment to this report, provided by 
the Mayor's Office, Ms. Ribble states that the City's 
general obligation bonding capacity, which is equal to 
three percent of the City's net assessed property value, is 
$2,329,486,178 based on a net assessed valuation of 
$77,649,539,270 for Fiscal Year 2000-2001. Ms. Ribble 
states that, as of September 1, 2000, the City had 
outstanding $936,025,000 aggregate principal amount of 
general obligation bonds, not including the subject bonds 
of this resolution, which is equal to 1.205 percent of the 
net assessed valuation. Therefore, Ms. Ribble advises that 
the City's current available general obligation bonding 
capacity is approximately $1,393,461,178. The proposed 
sale of bonds in the total amount of $46,215,000 in 
general obligation bonds, for Items 11, 12, and 13, as 
noted in Comment No. 1 above, would reduce the City's 
bonding capacity from approximately $1,393,461,178 to 
$1,347,246,178. Ms. Ribble advises that the City's 
bonding capacity varies from time to time as bonds are 
repaid and new bonds issued. 

10. Ms. Ribble states that the cost of selling the California 
Academy of Sciences Improvement Bonds, Series 2000G, 
in the amount of $15,095,000, for Item No. 13, File 00- 
1614, including fees for bond counsel, financial advisors, 
financial printing, and the services of the Mayor's Office 
of Public Finance and the City Attorney, are expected to 
be approximately $95,000 or approximately 0.63 percent 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

62 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



of the total value of California Academy of Sciences 
Improvement Bonds to be sold. 

11. As stated previously, approval of the proposed 
resolution (Item 13, File 00-1614) would authorize the 
sale of general obligation California Academy of Sciences 
Improvement Bonds, Series 2000G, in the amount of 
$15,095,000. However, all future expenditures of the bond 
proceeds would be subject to later appropriation by the 
Board of Supervisors through supplemental 
appropriations ordinances. 



Recommendation: Approve the proposed resolutions. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Attachment 



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Source: Mayor's Office of Public F inane 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

Items 11 and 12 - Files 00-1612 and 00-1613 

Departments: Mayor's Office of Public Finance 

Recreation and Park Department (RPD) 

Items: Item 11. File 00-1612 

Resolution authorizing and directing the sale of not to 
exceed $14,060,000 in General Obligation Bonds 
(Neighborhood Recreation and Park Facilities 
Improvement Bonds, 2000), Series 2000F; prescribing the 
form and terms of said bonds; authorizing the execution, 
authentication and registration of said bonds; providing 
for the appointment of depositories and other agents for 
said bonds; providing for the establishment of accounts 
related thereto; approving the forms of official notice of 
sale and notice of intention to sell bonds; directing the 
publication of the notice of intention to sell bonds; 
approving the form and execution of the official statement 
relating thereto; approving the form of the continuing 
disclosure certificate; approving modifications to 
documents; ratifying certain actions previously taken; and 
granting general authority to City officials to take 
necessary actions in connection with the sale and delivery 
of said bonds. 

Item 12. File 00-1613 

Resolution authorizing and directing the sale of not to 
exceed $17,060,000 in General Obligation Bonds (Golden 
Gate Park Improvements, 1992), Series 2000E; 
prescribing the form and terms of said bonds; authorizing 
the execution, authentication and registration of said 
bonds; providing for the appointment of depositories and 
other agents for said bonds; providing for the 
establishment of accounts related thereto; approving the 
forms of official notice of sale and notice of intention to 
sell bonds; directing the publication of the notice of 
intention to sell bonds; approving the form and execution 
of the official statement relating thereto; approving the 
form of the continuing disclosure certificate; approving 
modifications to documents; ratifying certain actions 
previously taken; and granting general authority to City 
officials to take necessary actions in connection with the 
sale and delivery of said bonds. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

Amount: 



Item 


Series 


Bonds 


Amount 


Item 11 
File 00-1612 


2000 F 


Neighborhood Recreation and 
Park Facilities Improvement Bonds 


$14,060,000 


Item 12 
File 00-1613 


2000 E 


Golden Gate Park 
Improvements Bonds 


17,060,000 


Total General Obligation Bonds to be Sold 


$31,120,000 



Descriptions: 



Item 11. File 00-1612 

In March of 2000, San Francisco voters approved the 
issuance of $110,000,000 in general obligation bonds, 
known as the Neighborhood Recreation and Park 
Facilities Improvement Bonds, to provide for the 
acquisition, construction and/or reconstruction of 
neighborhood recreation and park facilities and 
properties. On June 14, 2000 the City sold the first series 
of Neighborhood Recreation and Park Facilities 
Improvement Bonds (Series 2000C) in the amount of 
$6,180,000 (File No. 00-0679), leaving an unsold capacity 
of $103,820,000 under this bond issue. 

The proposed resolution would authorize and direct 
another sale of the Neighborhood Recreation and Park 
Facilities Improvements Bonds (Series 2000F) in a 
principal amount not to exceed $14,060,000. The proposed 
resolution would also approve the form and terms of the 
documents and official notices related to the sale, and 
authorize City officials to take various actions necessary 
to carry out the sale of bonds. 

Item 12, File 00-1613 

In June of 1992, San Francisco voters approved 
$76,300,000 in general obligation bonds, known as the 
Golden Gate Park Improvements Bonds, to fund the 
construction and/or reconstruction of Golden Gate Park's 
utilities and infrastructure. Since 1992, the City has sold 
$59,240,000 of this bond authorization, leaving an unsold 
authorization of $17,060,000. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

66 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



The proposed resolution would authorize the final sale of 
Golden Gate Park Improvements Bonds (Series 2000E) in 
a principal amount not to exceed $17,060,000. The 
proposed resolution would also approve the form and 
terms of the documents and official notices related to the 
sale, and authorize City officials to take various actions 
necessary to carry out the sale of bonds. 

Items 11 and 12. Files 00-1612 and 00-1613 

General provisions in both of the subject resolutions 
regarding the sale of bonds are as follows: 

• The sale of the bonds is tentatively scheduled for 
November 15, 2000. 

• The bonds would be sold at an interest rate not to 
exceed 12 percent per year and would have a final 
maturity in 20 years, on June 15, 2020. 

• An official statement describing the proposed bonds is 
referenced in the proposed resolution for approval by 
the Board of Supervisors. The official statement would 
be available to all potential bidders for the bonds. 

• Bonds would be awarded to the bidder whose bid 
represents the lowest total interest cost to the City. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Budgets: 



Item 11. File 00-1612 

The Recreation and Park Department proposes to expend 
the estimated $14,060,000 in proceeds from the 
Neighborhood Recreation and Park Faculties 
Improvement Bonds, Series 2G00F, as follows: 



Project 


Design 


Construction 
/Acquisition 


Total 


Acquire Natural Areas 




$2,000,000 


$2,000,000 


Alamo Square 




400,000 


400,000 


Argonne Playground 


$180,000 




180,000 


Balboa Park 


350,000 


200,000 


550,000 


Erosion Control 




500,000 


500,000 


Esprit Park 




1,000,000 


1,000,000 


Eureka Valley 


25,000 


500,000 


525,000 


Field Rehabilitation 


150,000 


400,000 


550,000 


Forestry 




600,000 


600,000 


Garfield Square 


300,000 


200,000 


500,000 


Glen Park Assessment/Planning 


50,000 




50,000 


Hamilton Square Rec Center 


200,000 




200,000 


Irrigation 


40,000 


200,000 


240,000 


J. P. Murphy Playground & 








Clubhouse 


20,000 


200,000 


220,000 


Joseph Lee Rec Center 


155,000 




155,000 


Lessing Sears Mini Park 




700,000 


700,000 


Mission Dolores Park 


150,000 


400,000 


550,000 


Moscone Center 


200,000 




200,000 


Natural Areas Management 




200,000 


200,000 


Oceanview Park & Rec Center 


200,000 




200,000 


Courts, Paths, Walkways 




350,000 


350,000 


Rochambeau Playground 


80,000 




80,000 


Rossi Playground 


60,000 




60,000 


Saint Mary's Square 




1,200,000 


1,200,000 


Sava Pool 


300,000 




300,000 


South Sunset Playground 


50,000 


450,000 


500,000 


Sunnyside Playground 


110,000 




110,000 


Treat and 23 rd Street 




1,200,000 


1,200,000 


Upper Noe Rec Center 


400,000 




400,000 


Youngblood-Coleman Clubhouse 


250.000 




250,000 


Total Project Costs 


$3,270,000 


$10,700,000 


$13,970,000 


Cost of Issuing Bonds 






90.000 ; 






Total Costs 


$14,060,000 ; 



Attachment I to this report, provided by the Recreation 
and Park Department, contains a description for each of 
these projects. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



fiR 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

Item 12. File 00-1613 



The Recreation and Park Department proposes to expend 
the estimated $17,060,000 in proceeds from the Golden 
Gate Park Improvements, Series 2000E, as follows: 



Project 


Amount 


Erosion Control 


$300,000 


Financial Consultation 


20,000 


Golden Gate Park East Entry and Extension 


910,000 


Irrigation & Fencing 


300,000 


Mallard/Middle Lakes Restoration 


824,706 


M.L.K. Utilities 


9,312,753 


North and South Lakes Rehabilitation 


2,810,527 


Program Management 


400,000 


Reforestation 


1,290,000 


Surveying 


500,000 J 


Wells - Pumps and Lines 


282,014 


Total Project Costs 


$16,950,000 


Cost of Issuing Bonds 


110,000 


Total Cost 


$17,060,000 



Comments: 



Attachment II to this report, provided by the Recreation 
and Park Department, contains a description for each of 
these projects. 

1. Including Items 11, 12 and 13, Files 00-1612, 00-1613, 
and 00-1614, of this report to the Finance and Labor 
Committee, the Mayor's Office of Public Finance proposes 
to sell general obligation bonds in a total amount not to 
exceed $46,215,000 on November 15, 2000. 

2. For Item 11, File 00-1612, according to Ms. Karen 
Ribble of the Mayor's Office of Public Finance, after the 
sale of the $14,060,000 in Neighborhood Recreation and 
Park Facilities Improvement Bonds (Series 2000F), the 
remaining amount of unsold Neighborhood Recreation 
and Park Facilities Improvement Bonds would equal 
$89,760,000. 

3. For Item 12, File 00-1613, Ms. Ribble reports that the 
subject resolution would authorize the final sale of the 
$17,060,000 in Golden Gate Park Improvements Bonds, 
Series 2000E, thus leaving no remaining unsold Golden 
Gate Park Improvements Bonds. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



6Q 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



4. Under the proposed resolutions (Items 11 and 12, Files 
00-1612 and 00-1613), the annual interest rate for the 
$14,060,000 in the Series 2000F of the Neighborhood 
Recreation and Park Facilities Improvements Bonds and 
the $17,060,000 in Golden Gate Park Improvements 
Bonds cannot exceed 12 percent. However, Ms. Ribble 
reports that if the bonds are sold in November of 2000, as 
is currently planned, the bonds would probably be sold at 
an overall effective interest rate of approximately 5.45 
percent. 

5. For Item 11, File 00-1612, according to Ms. Ribble, the 
proposed sale of Neighborhood Recreation and Park 
Facilities Improvement Bonds, Series 2000F, in the 
amount of $14,060,000 would result in a total debt service 
of approximately $22,862,070 ($14,060,000 in principal 
payments plus $8,802,070 in interest costs) over the 20- 
year life of the bonds. The average debt service payment 
per year would be approximately $1,143,104. 

6. For Item 12, File 00-1613, according to Ms. Ribble, the 
proposed sale of Golden Gate Park Improvements Bonds, 
Series 2000E, in the amount of $17,060,000 would result 
in total debt service of approximately $27,744,164 
($17,060,000 in principal payments plus $10,684,164 in 
interest costs) over the 20-year life of the bonds. The 
average debt service payment per year would be 
approximately $1,387,208. 

7. Ms. Ribble states that the proposed sale of the total of 
$46,215,000 in general obligation bonds, for Items 11, 12 
and 13, as noted in Comment No. 1 above, would result in 
a total debt service of approximately $75,153,351 
($46,215,000 in principal payments plus $28,938,351 in 
interest costs) over the 20-year life of the bonds. The 
average debt service payment per year would be 
approximately $3,757,668. 

8. For Item 11, File 00-1612, according to Ms. Peg 
Stevenson of the Controller's Office, the proposed sale of 
the Neighborhood Recreation and Park Facilities 
Improvement Bonds, Series 2000F, in the amount of 
$14,060,000, would result in an increase in the Property 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

70 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Tax rate of approximately $0.0014 per $100 of assessed 
value. At that rate, the owner of a single family residence 
assessed at $400,000 (after allowing for the Homeowner's 
Exemption Credit) would pay $5.60 in additional Property 
Taxes annually due to the sale of these bonds. 

9. For Item 12, File 00-1613, Ms. Stevenson reports that 
the proposed sale of Golden Gate Park Improvements 
Bonds, Series 2000E, in the amount of $17,060,000, would 
result in an increase in the Property Tax rate of 
approximately SO. 0017 per $100 of assessed value. At that 
rate, the owner of a single family residence assessed at 
$400,000 (after allowing for the Homeowner's Exemption 
Credit) would pay $6.80 in additional Property Taxes 
annually due to the sale of these bonds. 

10. Ms. Stevenson states that the proposed sale of a total 
of $46,215,000 in general obligation bonds, for Items 11, 
12, and 13, as noted in Comment No. 1 above, would 
result in a total increase in the Property Tax rate of 
approximately $0.0047 per $100 of assessed value. At that 
rate, the owner of a single family residence assessed at 
$400,000 (after allowing for the Homeowner's Exemption 
Credit) would pay $18.80 in additional Property Taxes 
annually due to the sale of these bonds. 

11. As stated in Attachment III, provided by the Mayor's 
Office of Public Finance, Ms. Ribble states that the City's 
general obligation bonding capacity, which is equal to 
three percent of the City's net assessed property value, is 
$2,329,486,178 based on a net assessed valuation of 
$77,649,539,270 for Fiscal Year 2000-2001. Ms. Ribble 
states that, as of September 1, 2000, the City had 
outstanding $936,025,000 aggregate principal amount of 
general obligation bonds, not including the subject bonds 
of this resolution, which is equal to 1.205 percent of the 
net assessed valuation. Therefore, Ms. Ribble advises that 
the City's current available general obligation bonding 
capacity is approximately $1,393,461,178. The proposed 
sale of bonds in the total amount of $46,215,000 in 
general obligation bonds, for Items 11, 12, and 13, as 
noted in Comment No. 1 above, would reduce the City's 
bonding capacity from approximately $1,393,461,178 to 
$1,347,246,178. Ms. Ribble advises that the City's 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

71 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



bonding capacity varies from time to time as bonds are 
repaid and new bonds issued. 

12. For Item 11, File 00-1612, Ms. Ribble states that the 
full cost of selling $14,060,000 in Series 2000F 
Neighborhood Recreation and Park Facilities 
Improvement Bonds, Series 2000F, including fees for 
bond counsel, financial advisors, financial printing, and 
the services of the Mayor's Office of Public Finance and 
the City Attorney, is expected to be approximately 
$90,000, or 0.64 percent of the total value of the 
Neighborhood Recreation and Park Facilities 
Improvements Bonds to be sold. For Item 12, File 00- 
1613, Ms. Hollenebck reports that the full cost of selling 
$17,060,000 in Golden Gate Park Improvements Bonds is 
expected to be approximately $110,000, or 0.64 percent of 
the total value of the Golden Gate Park Improvements 
Bonds to be sold. Therefore, the full cost of selling the 
total of $31,120,000 in bonds under the two subject 
resolutions would be $200,000 or approximately 0.64 of 
the total value of the bonds to be sold. 

13. As stated previously, approval of the two proposed 
resolutions would authorize the sale of up to $14,060,000 
in general obligation Neighborhood Recreation and Park 
Facilities Improvement Bonds, Series 2000F, (Item 11, 
File 00-1612) and up to $17,060,000 in general obligation 
Golden Gate Park Improvements Bonds, Series 2000E, 
(Item 12, File 00-1613) for a total maximum in bonds of 
$31,120,000. However, all future expenditures of the bond 
proceeds would be subject to later appropriation by the 
Board of Supervisors through supplemental 
appropriations ordinances. 



Recommendation: Approve the proposed resolutions. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Attachment I 
Page 1 of 3 



Vity and County of San Francisco Recreation and Park Department 




DATE: August 9, 2GC0 

TO: Karen Ribbie, Mayer's Office - Pubiic Fxiance 

FROM: Deborah Learner, Park Planner, Recreaticn and Park Department 

RE: PARK BOND 20CO - FaQ 2000 Ecnd Safe - Project Descriptions: 

Total Eond is 313,970,000, as foilows: 

1 . Acquire Natural Areas - $2,000,000: Acquire additional natural areas at Hawk Hiil Edcehiil 
and Palou-Phefps. 

2. Alamo Square - 5400,000: Funding will augment existing Open Space funds to implement 
construction of improved playground and provide ADA access. Tne project, which has 
received conceptual approval from the Recreaticn and Park Commission, is expected to 
go out to bid in 2001. 

3. Argonne Playground - $180,000: New staff will be assigned to work with the community in 
the redesign of the Argonne Playground. 

4. Ealboa Park and Stadium - $550,000: New staff wfU be assigned to improve the stadium 
seating for disabled access, and general park rehabfliiaticn. 

5. Erosion Control - $500,000: Additional funding to implement erosion control projects at 
various sites, including master planning at Buena Vista Park. 

6. Eureka Valley - $525,000: Ecnd funds will be available to augment the building project 
which is to go cut to bid in Winter cf 2000 and to support redesign/construction of play area 
impacted by the new construction. 

7. Field Rehabilitation - 5550,000: Additional funding to support artificial tun" installation at 
Ycungblccd-Ccleman as well as at Franklin Square. 

8. Forestry - $600,000: Urban Forestry improvements in neighborbece parks. 

9. Garfield Square - $5C0,CQ0: Funds wiil augment existing Open Space and general fund 
appropriations to support a new play area and landscaping en the south side of the park 

10. Glen Park - 550.0GO: Funds will be used to sucpert a park site assessment prccram 
focusing en the building and land use pian ict the park. 

11. Hamilton Square and Pool - 5200,000: Additional funding to prepare conceptual and 
schematic plans fcr the rehabilitation or reconstruction cf Hamilton Recreaticn Center -rid 
Peel. 

IcLaren Lodge, Golden Gate Park FAX: (4 1S) 655-7120 

01 Stanyan Street Phone: pifl 331-2700 

an rranc:sco. CA 94117-13SS ' 



Attachment I. 
Page 2 ol !3 



12. Irrigation - $240,000: funding to support design and installation cf the automatic irrigation 
systems at several locations. 

13. J. P. Murphy Playground and Cufchouse - $220,000: Project will include preparation of 
plans for rehabilitation of the playground, courts and dubhcuse. 

14. Joseph Lee - Si £5,000: Initiate plans fcr renovation cr reconstruction cf the Joseph Lee 
Recreation Canter. 

15. Lsssing-Sears Mini Park - $700,000: Apprccnaticn to augment existing Cpen Space funds 
to construct approved park plan. 

16. Mission Ddtres - $550,000: Funds win augment existing Cpen Space fines to implement 
playground improvements. 

17. Moscone Playground - $2C0,CCC: Design budget to prepare plans fcr park site 
improvements. May support approved playground project 

1 8. Natural Areas Improvement - $200,000: Fundi wiil supcert natural areas 'mcrcvements en 
various properties. Improvements and stewardship activities often implemented with 
volunteer and/cr Conservation Corps assistance. 

19. Oceanview - $200,000: New staff wiil be assigned to develop rnprcvements cr 
construction pians fcr Ccearrview Playground and Recreation Center. 

20. Courts, paths and sidewalks - $250,000: Funding will augment existing project budcet to 
complete work at North Beach and Jose Corcnsdc rlaycrcur.es. 

21. Rcchamfceau F'ayground - $20,CC0: Ne* staff will be assigned to develop improvement 
plans fcr Rcchamceau Playground. 

22. Rossi Playground - $60,000: New staff wiil be assigned to Ceveicp landscape improvement 
pians fcr the park and playground. 

23. SL Mary's Square - $1200,000: Funds will be used to augment existing budget to 
implement plans fcr a new play area and improvement of park infrastructure 

24. Sava Pool - $300,000. Funds w3 augment pre/icus appropriation to work with pool 
consultant in developing new facility at Larsen Fark/Sava PocL 

25. South Sunset Playground - ScCO.CCO: Funds will be usad to construct a new playground 
en the site cf a deteriorated play structure. 

25. Sunnysice Playground - $110,000: Funding wi augment existing Open Space funds to 
continue planning and design fcr new park amenities nduding a new piay area. 

27. Twenty-third and Treat - S12C0.CCC: Additional funding wul augment existing Cpen Szzza 
funds to construct a small dubhcuse and landscape improvements in this new park 
facility. Improvements are scheduled to go cut to bid eariy in 2C01 . 



Attachment I 
Page 3 of 3 



28. Upper Noe Recreation Center - $400,000: Plans will be developed by new staff to upgrade 
trie existing play area, provide disabled access and address building defkrences. 

29. Youngdlood-Ccieman - $250,000: Additional funding to address landscape improvements 
and consider rehabilitation needed for the clubhouse. 



DLems 

Bend 2000- Pall Sate 



Attachment II 
Page 1 of 2 



ity and County of San Francisco 



Recreation and Park Department 




DATEr 
TO: 
FROM: 
RE: 



August 21. 2000 

Karen Ribble, Public Finance - Mayor's Office 

Deborah Learner, Recreation and Park Department 

Golden Gate Park Infrastructure Bond - Fall Bond Sale 
Project Description 



1 . Erosion Control - 5300,000: Construction of erosion control structures to contain sal 
and retain pathways and provide proper drainage in the park. 

2. Financial Consultant - $20,000: Direct charge funding for hours specmcally related to 
Golden Gate Park Bond financing and bond sale. 

3. Golden Gate Park East Entry and Extension -S91 0,000: Construction of improvements 
in the east end of Golden Gate Park and the landscape extension on Kennedy Drive to 
improve safety and beautify the park. 

4. Irrigation/Fencing - $300,000: Direct charge project to accomplish small irrigation and 
fencing projects. 

5. Mallard/Middle Lakes Restoration - $324,706: Restoration of Mallard and Middle Lakes 
through draining, removal of sediment reconstruction of the lake liners and 
reestablishment of shoreline and appropriate vegetation. 

6. M. L. K. Utilities - $9,312,753: Construction of major utilities within the southern zcne of 
Golden Gate Park. This includes water and distribution lines, sewers, electrical lines, 
pathway repairs, disabled access. 

7. North and South Lakes Rehabilitation - S2.81 0.527: Restoration of North and South 
Lakes through draining, removal of sediment reconstruction of the lake liners and 
reestablishment of shoreline and appropriate vegetation 

8. Program Management - $400,000: Direct charge funding to support prc;ecr. 
management directly related to the Golden Gate Park Bend. Includes accounting, 
budgeting, project management activities. 

9. Reforestation - $1,290,000: Direct charge funding for tasks directly related to the 
reestablishment of the park forest infrastructure. Includes site preparation, planting and 
establishment cf the park forest 



d_aren Lodge, Golden Gate Park 

)1 Stanyan Street 

in Francisco, CA 94117-1398 



FAX; (415)666-7130 
Phone: (415)331-2700 



Attachment II 
Page 2 of 2 



10. Surveying - 5500,000: Provide fcr surveying and data management needs related to 
preparation of plans, specifications and topographic surveys specific to the Golden 
Gate Park infrastructure bond. 

1 1 . Wells - Phase II - ' Pump and Lines - 3282,014: Provides for the installation of wells, 
pumps and the connection of distribution lines from the pumps to the water distribution 
system and central reservoir. 

1 2. Bond Issuance Costs - $1 1 0,000 



DL:ems 

ggp bond sale - prej description 



Attachment III 



City and County of Sm Francisco, Chartered General Obligation Bond Debt Capacity 



FY 2000-31 



Chartered General Obligation Hood Opacity 

Net Valuation J T7,W9J39^TO 

3% Cap on Oaraanding Qblipr.iinn* 2.329.486.1T8 

General Obligation Boadj Ijiued 10 Daxe 

Principal Amount of Bonds Outstanding at 9/1/00 916.025,000 

Remaining Capacity as of 9/1/00 1.413.461. ;?S 

General Obligation Bonds Authorized/Expected u> be luucJ 

Golde-.i Gate Part Improvrmcus ( 1 992 vote) 17.060 .C00 

Recreation St. Parts (2000 vote) 14,060,000 

California Academy of Sciences (2CC0 vole) 13.09S.OOO 

Total New Bonds 46.2!S.CC0 

Remaining Capacity after Fail 20C0 Bend Sale !J67,24cU73 



Source: Mayor's Office of Public Finance 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

Item 14 -File 00-1523 

Note: This item was continued by the Finance and Labor Committee at its 
meeting of September 20, 2000. 



Department: 
Item: 



Services to be 
Performed: 

Description: 



Airport 

Resolution approving the Controller's certification that 
public parking management services for the San Francisco 
International Airport can continue to be practically 
performed by a private contractor at lower cost for the year 
commencing July 1, 2000 than if the work were performed 
by City and County employees. 

Public parking management services 

Charter Section 10.104 provides that the City may contract 
with private firms for services, if the Controller certifies, 
and the Board of Supervisors concurs, that such services 
can in fact be performed by private firms at a lower cost 
than similar work performed by City employees. 

The Controller has determined that contracting for public 
parking management services at the Airport for FY 2000- 
2001 would result in the estimated savings as follows: 



Comments: 



City-Operated Service Costs 

Parking & Taxicab Operations 
Security Control 
Janitorial Services 
Total 

Contractual Services Costs 

Parking & Taxicab Operations 
Security Control 
Janitorial Services 
Total 

Estimated Savings 



Low 



Hish 



$11,554,883 $13,434,209 
4,541,806 5,292,830 
2,331.935 2.709.581 

$18,428,624 $21,436,620 



$9,865,851 
2,497,592 
2,301.996 



$9,865,851 
2,497,592 
2,301,996 



$14,665,439 $14,665,439 
$3,763,185 $6,771,181 



1. Public parking management services for the Airport 
include management of parking and taxicab operations, 
security guard services and janitorial services, according to 
Mr. Fred Strong of the Airport. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



2. Public parking management services have been 
contracted out since 1971, the first year that these services 
were provided. 

3. The prior one-year contract, which commenced on July 

1, 1999 and expired on June 30, 2000, was with AMPCO 
System Parking Company. Mr. Strong states that AMPCO 
has provided public parking management services to the 
Airport for the last nine years. The Airport is exercising 
the fourth of four one-year options to renew this contract 
with AMPCO. 

4. The subject one-year contract with AMPCO began on 
July 1, 2000. Therefore, the proposed resolution should be 
amended to provide for retroactive authorization. 

5. The Contractual Services Costs used for the purpose of 
this analysis are AMPCO's projected FY 2000-2001 costs for 
public parking management services. 

6. According to Mr. Strong, AMPCO provided both public 
parking management services and employee parking 
management services until September 1, 1999. On 
September 1, 1999, ABC Parking Inc./THOR assumed 
responsibility for the provision of employee parking 
management services. Mr. Strong reports that a proposed 
resolution retroactively authorizing the contract with ABC 
Parking Inc./THOR for employee parking management 
services will be submitted for approval by the Board of 
Supervisors at the end of September of 2000. 

7. The Attachment to this report, provided by the 
Airport, is the Controller's supplemental questionnaire 
with the Department's responses. 

Recommendations: 1. Amend the proposed resolution to provide for 
retroactive authorization, in accordance with Comment 
No. 4 above. 

2. Approve the proposed resolution, as amended. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Attachment 



CHARTER 10.104.15 (PROPOSITION J) QUESTIONNAIRE 



Department: Airport Commission 

Contract Services: Public Automobile Parking 

Contract Period: July 1 , 2000 to June 30, 2001 



1 . Who performed the activity/service prior to contracting out? 

This service has always been contracted out, it has never been operated by City personnel. 

2. How many City employees were laid off as a result of contracting out? 

None 

3. Explain the disposition of employees if they were not laid off. 
N/A 

4. What percentage of City employees' time is spent on services to be contracted out? 

N/A 

5. How long have the services been contracted out? Is this likely to be a one-time or an 
ongoing request for contracting out? 

Services have been contracted out since October 16, 1971, it is likely to remain contracted 
out. 

6. What was the first fiscal year for a Proposition J certification? Has it been certified for 
each subsequent year? 

It has been certified each year since 1980. 

Yes, it has been certified each year since Fiscal Year 1980/81. 

7. How will the services meet the goals of your MBE/WBE Action Plan? 

Although this contract was not awarded to a MBE/WBE firm in 1995, it must adhere to the 
City's non-discrimination ordinance contained in Chapters 12B & 12C of the City's 
Administrative Code. This contract contains MBE/WBE goals which include "best effort to 
meet a 30% goal. 

8. Does the proposed contract require that the contractor provide health insurance for its 
employees? Even if not required, are health benefits provided? 

The contractor provides health insurance for its employees through union agreements. 

9. Does the proposed contractor provide benefits to employees with spouses? If so, are 
the same benefits provided to employees with domestic partners? If not, how does the 
proposed contractor comply with the Domestic partners ordinance? 

AMPCO and parent ABMI are working on aj^e4kin-wjjiie^3ornestic Partners Program. This 
contract is unchanged and the requirement was n«t inc!uded//n the contract. 

loo* 



Department Representative: I ,^^/N/S ^^ "' \f 

Robert Rhoa<ies\ Oep'utyAirport Director - Business 

Telephone Number: (650)821^050 



l.O:.OJ.02.\MPCOPROPJCHARTERIOQuesnonnairtOO-OI 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Item 15 - File 00-1622 

Department: 

Item: 



Grant Amount: 
Grant Period: 
Source of Funds: 

Project: 
Description: 



Airport 

Resolution authorizing the Airport Commission to accept and 
expend a grant in the amount of $140,000 from the Bay Area 
Air Quality Management District (Air District) for 
acquisition of Compressed Natural Gas (CNG) buses. 

$140,000 

November 2000 through May 2002 (19 months) 

Transportation Fund for Clean Air (TFCA) administered by 
the Bay Area Air Quality Management District (Air District) 

Airport Clean Fuel Bus Demonstration Project 

The Airport Clean Fuel Bus Demonstration Project is a 
demonstration project to encourage companies that provide 
on-Airport passenger and employee shuttle operations 
between the Airport terminals and the long-term parking lots 
to replace a portion of their gasoline- and diesel-powered 
vehicles with clean CNG vehicles. The subject funds would be 
provided by the Air District to the Airport to subsidize the 
incremental cost of CNG buses over gasoline- and diesel- 
powered vehicles. 

The grant would provide partial funding to the Airport to 
purchase four CNG buses for on-Airport passenger and 
employee shuttle operations between the Airport terminals 
and the long-term parking. According to Mr. Roger Hooson of 
the Airport, the Air District contributes up to a maximum of 
$35,000 per vehicle toward the incremental cost of CNG 
vehicles over gasoline- and diesel-powered vehicles. 
Attachment I, provided by the Airport, shows that the grant 
provides approximately 11 percent, or $140,000, of the total 
cost of the four CNG vehicles. The Airport would provide the 
balance of approximately 89 percent, or $1,152,000 in Airport 
revenue, of the estimated total cost of $1,292,000 for the four 
CNG vehicles. 

The Airport would supplement the grant funds they receive 
in order to cover the entire cost of the new CNG vehicles. The 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Airport would also administer tbe grant, disburse funds to 
tbe contracted transportation operator SFO Shuttle Bus 
Company, and monitor the project. The Airport will absorb 
the administrative costs of the grant application process and 
the Airport will also contribute some staff time in 
administering the funds and monitoring operator compliance, 
through the use of Airport revenue, at an estimated cost of 
$1,000. 

The SFO Shuttle Bus Company operates the long-term 
parking shuttle bus service under contract to the Airport. 
The subject vehicles would be purchased by the SFO Shuttle 
Bus Company and leased to the Airport for approximately 7 
years. According to Mr. Hooson, the Airport will make 
monthly lease payments from its Air Transit Programmatic 
Fund, which obtains its monies mostly from Airport parking 
revenue, to the SFO Shuttle Bus Company to cover the 
capital, operating, and maintenance costs of the four CNG 
vehicles not covered by the grant funds. At the termination of 
the lease, the Airport would own the vehicles. 



Budget: 



Estimated Costs 

(Estimates are based on the incremental cost of a CNG 
fueled vehicle compared to a conventional fueled vehicle. 
The Air District contributes up to a maximum of $35,000 
per vehicle.) 


Per full-size transit 
vehicle (26 seats plus 
luggage storage) 


$35,000 x 4 vehicles 


$140,000 


Total Budget for Grant: 


$140,000 



Although the subject grant does not require matching funds, 
Mr. Hooson reports that, to supplement the Air District 
grant, the Airport would pay the remaining balance of 
$1,152,000 of the estimated total cost of $1,292,000 for the 
four CNG vehicles. The Airport funds will come from the Air 
Transit Programmatic Fund. The Airport will be responsible 
for any maintenance and operating costs incurred by the four 
CNG vehicles. 



Mr. Hooson advises that all costs under this grant are capital 
costs, and 100 percent of the funds would be used toward the 
purchase of the four, 26-passenger CNG fueled buses made 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Airport 
Matching Funds: 

Indirect Costs: 



Comments: 



by New Flyer Industries, a Canadian manufacturer. The 
actual amount paid by the Air District depends on the 
number and type of the CNG buses ultimately sought by the 
SFO Shuttle Bus Company, and the incremental costs of 
each bus purchased, compared to the closest gasoline- or 
diesel-powered model. However, based on the estimated cost 
data provided, a total of four CNG buses would be purchased. 



None 



Indirect costs would be waived in order to maximize use of 
grant funds on direct services. 

1. The buses will be used by the SFO Shuttle Bus Company 
generally for transportation for Airport users between the 
Airport terminals and the long-term public parking lot. 
Emissions for the four CNG buses must be below the level 
specified by the Air District. The gross vehicle weight of the 
buses must be greater than 10,000 pounds. 

2. Mr. Hooson reports that the SFO Shuttle Bus Company, 
on behalf of the Airport, would purchase, operate, and 
maintain the four dedicated CNG buses to be funded in part 
by this program. The SFO Shuttle Bus Company would also 
compile vehicle maintenance histories and provide the data 
to the Airport. The SFO Shuttle Bus Company would be 
required to participate in audits that, if deemed necessary, 
would be conducted by the Airport and the Air District to 
verify the companys' compliance with grant's guidelines. 

3. The SFO Shuttle Bus Company has provided specific 
information on the gasoline- and diesel-powered buses, which 
the company plans to replace in exchange for CNG buses. 
The four 40-foot pure CNG buses would be assigned to 
replace four 1982 diesel buses operating primarily in long- 
term parking lot service. 

4. Attachment II is the Airport's Grant Application 
Information Form, which includes the Disability Access 
Checklist. 



5. Item 16, File 00-1623, of this report to the Finance and 
Labor Committee also pertains to one other Airport grant 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

84 






Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



related to the acquisition of 34 CNG buses that would service 
various hotels and off-Airport parking facilities. 



Recommendation: Approve the proposed resolution. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Attachment I 



— H °- 



| > 



3t 

03 > 



£ E 



v: o 



- .3 






3 f 



Rfi 



V- • Attachment II 

File dumber Page 1 of 2 

(Provided by Clerk of Board of Supervisors) 

Grant Information Form 

(Effective January 2000) 

Purpose: Accompanies proposed Board of Supervisors resolutions authorizing a Department to accept and 
expend grant funds. 

The following describes the grant referred to in the accompanying resolution: 

1 . Grant Title: 2000 Airport Clean Fuel Bus Demonstration Project 

2. Department: Airport Commission 

3. Contact Person: Roger Hooson Telephone: (650) 821-651 1 

4. Grant Approval Status (check one): 

[ ] Approved by funding agency [x] Not yet approved 

5. Amount of Grant Funding Approved or Applied for: $140,000 

6a. Matching Funds Required: None 
b. Source(s) of matching funds (if applicable): 

7a. Grant Source Agency: Bay Area Air Quality Management District 
b. Grant Pass-Through Agency (if applicable): 

8. Proposed Grant Project Summary: 

San Francisco International Airport will take delivery of four (4) natural gas buses for on-Airport passenger and 
employee shuttle operation by an existing contractor. Emissions must be below the level specified by the Bay 
Area Air Quality Management District. 

3. Grant Project Schedule, as allowed in approval documents, or as proposed: 
Start-Date: 11/00 End-Date: 5/02 

0. Number of new positions created and funded: None 

1. If new positions are created, explain the disposition of employees once the grant ends? 

N/A 

2a. Amount budgeted for contractual services: None 

b. Will contractual services be put out to bid? N/A 

c. If so, will contract services help to further the goals of the department's MBE/WBE 
requirements? N/A 



.'•"„ . Attachment II 

\' Page 2 of 2 

d.' Is this likely to be a one-time or ongoing request for contracting out? N/A 

13a. Does the budget include indirect costs? [ ] Yes [x] No 

b1 . If yes, how much? S 

b2. How was the amount calculated? 

c. If no, why are indirect costs not included? 

[ ] Not allowed by granting agency [x] To maximize use of grant funds on direct services 

[ ] Other (please explain): 

14. Any other significant grant requirements or comments: 



"Disability Access Checklist*** 

15. This Grant is intended for activities at (check all that apply): 

[x] Existing Site(s) [ ] Existing Structure(s) [x] Existing Program(s) or Service(s) 

[ ] Rehabilitated Site(s) [ ] Rehabilitated Structure(s) [ ] New Program(s) or Service(s) ' 

[ ] New Site(s) [ ] New Structure(s) 

16. The Departmental ADA Coordinator and/or the Mayor's Office on Disability have reviewed the proposal 
and concluded that the project as proposed will be in compliance with the Americans with Disabilities Act and 
all other Federal, State and local access laws and regulations and will allow the full inclusion of persons with 
disabilities, or will require unreasonable hardship exceptions, as described in the comments section: 

Comments: 



Departmental or Mayor's Office of Disability Reviewer: Ron Fong 
Date Reviewed: ^ ' "2-S -~io^<^> 

Department Approval: Ro^ fo^ ^ SPo tflrp^ £o>^o'\\ <St , l/lc _fl_ c ££ f 

(Name) I (Title) I 



IS 




(Signature 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



Item 16 - File 00-1623 

Department: 

Item: 



Grant Amount: 
Grant Period: 
Source of Funds: 

Project: 
Description: 



Airport 

Resolution authorizing the Airport Commission to accept 
and expend a grant in the amount of $980,000 from the Bay- 
Area Air Quality Management District (Air District) for 
acquisition of Compressed Natural Gas (CNG) buses. 

$980,000 

November 2000 through May 2002 (19 months) 

Transportation Fund for Clean Air (TFCA) administered by 
the Bay Area Air Quality Management District (Air 
District) 

Airport Natural Gas Shuttle Implementation Project, Low- 
Emission Vehicle Program 

The Airport Compressed Natural Gas (CNG) Shuttle 
Implementation Project, Low-Emission Vehicle Program, is 
a project to encourage companies that transport the public 
and airline crews to and from the Airport to replace a 
portion of their gasoline- and diesel-powered vehicles with 
clean CNG vehicles. The project would provide funds to 
transportation companies operating at the Airport to 
subsidize the incremental cost of CNG buses exceeding the 
cost of gasoline- and diesel-powered vehicles. In general, 
the vehicles to be funded by this project would operate 
within a 10-mile radius of the Airport, and to downtown 
San Francisco. 

The subject grant would provide partial funding to 
purchase 34 CNG buses that would service various hotels 
and off-Airport parking facilities. According to Mr. Roger 
Hooson of the Airport, the Air District contributes up to a 
maximum of $35,000 per vehicle toward the incremental 
cost of CNG vehicles over gasoline- and diesel-powered 
vehicles. Attachment I, provided by the Airport, shows that 
the grant provides approximately 27 percent, or $980,000, 
of the total cost of the 34 CNG vehicles. The five 
participating transportation companies, namely Bauer 
Transportation, SFO Airporter, SkyPark, Anza Park & Sky, 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



and Advanced Airporter, would provide the balance of 
approximately 73 percent, or $2,700,000, of the estimated 
total cost of $3,680,000 for the 34 CNG vehicles. 

According to Mr. John Martin, Airport Director, 
transportation service providers will pay the equivalent 
cost of a conventional fuel vehicle, with the Air District 
contributing only the additional charge for a clean air 
vehicle of similar type, up to a maximum of $35,000 per 
vehicle. According to Mr. Hooson, no Airport funds will be 
contributed toward the cost of these vehicles, and the 
Airport will have no ownership interest in the vehicles. 
However, the Airport will absorb the administrative costs of 
the grant application process and the Airport will also 
contribute some staff time in administering the funds and 
monitoring operator compliance, through the use of Airport 
revenue, at an estimated cost of $3,000. 

The Airport would administer the grant, disburse Air 
District funds to participating transportation companies, 
and monitor the project. The participating agencies will 
purchase or lease and maintain the vehicles to be funded by 
the subject grant, operating said vehicles for their useful 
life in the San Francisco Bay Area. The five transportation 
companies mentioned above have provided the Airport with 
letters of intent to participate in the demonstration project. 

According to Mr. Hooson, an important component of this 
demonstration project is the CNG fueling station at the 
Airport's Ground Transportation Staging Area located near 
the U.S. 101 Millbrae Avenue interchange. The Airport 
awarded a lease to a private firm, Trillium USA, to build 
and operate the CNG fueling station facility. This fueling 
station became operational in June of 1999 and is 
accessible to any of the Airport's contracted and permitted 
transportation companies that provide transportation to 
and from the Airport. These services include door-to-door 
vans, scheduled vehicles, taxis and the Caltrain-SFO 
Shuttle. Under the terms of its lease with the Airport, 
Trillium USA pays to the Airport three percent of its gross 
revenues, or a minimum of $593 monthly ($7,116 annually), 
whichever is greater. Most of these vehicles will refuel at 
this site. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 

Budget: 



Estimated Costs 

Estimates are based on tbe incremental increased cost of a 
CNG fueled vehicle compared to a conventional fueled 
vehicle. The Air District contributes up to a maximum of 
$35,000 per vehicle. 


Per full-size transit 
vehicle (30 seats plus 
luggage storage) 


$35,000 x 20 vehicles 


$700,000 


Per full-size transit 
vehicle (21 seats plus 
luggage storage 


$20,000 x 14 vehicles 


$280,000 


Total Budget for Grant: 


$980,000 



Airport 
Matching Funds: 

Indirect Costs: 



Comments: 



To supplement the Air District grant, the five 
transportation providers would pay the balance of 
$2,700,000 of the estimated total cost of $3,680,000 for the 
34 CNG vehicles, as listed in Attachment I, provided by the 
Airport. 

Mr. Hooson advises that all costs under this grant are 
capital costs, and 100 percent of the funds would be used 
toward the purchase of 20 Supreme President 30-seat CNG 
fueled buses and 14 Ford E-450 21-seat CNG fueled buses. 
The actual amount paid by the Air District will depend in 
the number and type of the CNG buses ultimately sought 
by the transportation companies, and the incremental costs 
of each bus purchased, compared to the closest gasoline- or 
diesel-powered model. However, based on the estimated 
cost data provided, a total of 34 CNG buses would be 
purchased. 

None 

Indirect costs would be waived in order to maximize use of 
grant funds on direct services. 

1. The Airport hotel and parking courtesy shuttle operators 
will acquire 34 dedicated CNG buses. Emissions must be 
below the level specified by the Air District. The gross 
vehicle weight of the buses must be greater than 10,000 
pounds. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 4, 2000 Finance and Labor Committee Meeting 



2. Mr. Hooson reports that the Airport has selected 34 
vehicles under five transportation operators for the 
demonstration project (see Attachment I). These five 
operators would purchase, operate, and maintain the 
vehicles to be funded by this program. The five operators 
would also compile vehicle maintenance histories and 
provide the data to the Airport. The five transportation 
companies would be required to participate in audits that, 
if deemed necessary, would be conducted by the Airport and 
the Air District to verify the companies' compliance with 
grant's guidelines. 

3. Attachment II is the Airport's Grant Application 
Information Form, which includes the Disability Access 
Checklist. 

4. Item 15, File 00-1622, of this report to the Finance and 
Labor Committee also pertains to one other Airport grant 
related to the acquisition of four CNG buses for on-Airport 
passenger and employee shuttle operations between the 
Airport terminals and long-term parking. 



Recommendation: Approve the proposed resolution. 




Harvey M. Rose 



Supervisor Yee 
Supervisor Bierman 
President Ammiano 
Clerk of the Board 
Controller 
Steve Kawa 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Attachment I 



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O 

2 
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3 

3 



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y Attachment II 

File Number. Pa § e : ot 2 

(Provided by Clerk of Board of Supervisors) 

Grant Information Form 

(Effective January 2000) 

Purpose: Accompanies proposed Board of Supervisors resolutions authcnzing a Department to accept and 
expend grant funds. 

The following describes the grant referred to in the accompanying resolution: 

1 . Grant Title: 2000 Airport Natural Gas Shuttle Implementation Project 

2. Department: Airport Commission 

3. Contact Person: Roger Hooson Telephone: (650) 821-6511 

4. Grant Approval Status (check one): 

[ ] Approved by funding agency [x] Not yet approved 

5. Amount of Grant Funding Approved or Applied for. $980,000 

6a. Matching Funds Required: None 
b. Source(s) of matching funds (if applicable): 

7a. Grant Source Agency: Bay Area Air Quality Management District 
b. Grant Pass-Through Agency (if applicable): 

8. Proposed Grant Project Summary: 

San Francisco International Airport hotel and panning courtesy shuttle operators will acquire 34 dedicated 
compressed natural gas (CNG) buses. Emissions must be below the level specified by the Bay Area Air 
Quality Management District. The gross vehicle weight of the buses must be greater than 10,000 pounds. 

9. Grant Project Schedule, as allowed in approval documents, or as proposed: 

Start-Date: 11/00 End-Date: 5/02 

10. Number of new positions created and funded: None 

1 1 . If new positions are created, explain the disposition of employees once the grant ends? 

N/A 

12a. Amount budgeted for contractual services: None 

b. Will contractual services be put out to bid? N/A 

c. If so. will contract services help to further the goals of the department's MB&WEE 

requirements? N/A 



r Attachment II 

Page 2 of 2 

. d. Is this likely to be a one-time or ongoing request for contracting out? N/A 

13a. Does the budget include indirect costs? [ ] Yes [x] No 

b1. If yes, how much? $ 

b2. How was the amount calculated? 

c. If no, why are indirect costs not included? 

[ ] Not allowed by granting agency [x] To maximize use of grant funds on direct services 

[ j Other (please explain): 

14. Any other significant grant requirements or comments: 



"Disability Access Checklist*** 

15. This Grant is intended for activities at (check all that apply): 

x] Existing Site(s) [ ] Existing Structure(s) [x] Existing Program(s) or Service(s) 

; ] Rehabilitated Site(s) [ j Rehabilitated Structure(s) [ ] New Program(s) or Service(s) 

| ] New Site(s) [ ] New Structure(s) 

16. The Departmental ADA Coordinator and/or the Mayor's Office on Disability have reviewed the proposal 
and concluded that the project as proposed will be in compliance with the Americans with Disabilities Act and 
all other Federal, State and local access laws and regulations and will allow the full inclusion of persons with 
disabilities, or will require unreasonable hardship exceptions, as described in the comments section: 

Comments: 



Departmental or Mayor's Office of Disability Reviewer: Ron Fong 
Date Reviewed: ^1^-Ijq- 

)epartment Approval: K^y> i-o^^ 6Pq V^O^ Cou^->\\.a_^ ^ 0\-&\^z_. 

(Name) \ (Title) | 



(Signatur 





City and County of §an Francisco 

Tweeting Minutes 

Finance and Labor Committee 

Members: Supervisors Leland Yee, Sue Bierman, Tom Ammiano 
Clerk: Mary Red 



[All Committees] 

Government Document Section 

Main Library 



Wednesday, October 11, 2000 



10:00 AM 
Regular Meeting 



City Hall, Room 263 



Members Present: Leland Y. Yee, Sue Bierman, Tom Ammiano. 



aOCUMfcNTs DEPT 
OCT I 3 2C00 

SAN FRANCISCO 
PUBLIC LIBRARY 



Meeting Convened 



001608 



The meeting convened at 10:12 a.m. 



[Reserved Funds, Fire Department] 

Hearing to consider release of reserved funds, Fire Department (Fiscal Year 2000-2001 Budget), in the amount 

of $1,414,943 for overtime costs. (Fire Department) 

9/12/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. Department requests this item be scheduled for the September 

27, 2000 meeting. 

9/27/00, CONTINUED. Heard in Committee. Speakers:Harvey Rose, Budget Analyst; Acting Chief Tobacco, Fire Department; 

Supervisor Yee; Ed Harrington, Controller. 

Continued to October 1 1 , 2000. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Acting Chief Tobacco, Fire Department; Ed 
Harrington, Controller; Supervisor Yee, Supervisor Ammiano; Ken Bruce, Budget Analyst's Office; Erin 
McGrath, Mayor's Budget Office; Jim Corrigan; Supervisor Bierman. 
Amended to release reserved funds in the amount of $1,866,591. 
APPROVED AND FILED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001734 [Chinatown Youth Center Release of Reserve (Fiscal Year 2000-2001 Budget)] 
Supervisor Yee 

Motion releasing $100,000 placed on Board of Supervisors reserve for the Chinatown Youth Center. 
10/2/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Debra Alvarez, Director, Department of 
Children, Youth and Their Families; Robert Chan, Executive Director, Chinatown Youth Center (CYC); 
George Ong, Board of Directors, CYC; Ken Boeri, Board of Directors, CYC; Richard G. Ow, Immigrant 
Rights Commission. 

RECOMMENDED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



City and County of San Francisco 



Printed at 2:47 PM on 10/11/00 



Finance and Labor Committee 



Meeting Minutes 



October 11, 2000 



001699 |Airport sublease of warehouse space to the S.F. Fine Arts Museums) 
Supervisor Nevvsom 

Resolution approving a sublease of warehouse space between the Corporation of the San Francisco Fine Arts 
Museums and the City and County of San Francisco, acting by and through its Airport Commission. (Airport 
Commission) 

9/27/00, RECEIVED AND ASSIGNED (o Finance and Labor Committee 
Continued to October 25, 2000. 
CONTINUED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



001700 (Airport Equipment Maintenance and Operating Agreement) 

Resolution approving Equipment Maintenance and Operating Agreement between San Francisco Terminal 
Equipment Company LLC and the City and County of San Francisco, acting by and through its Airport 
Commission. (Airport Commission) 

9/27/00, RECEIVED AND ASSIGNED to Finance and Labor Committee 

Heard in Committee. Speakers: Harvey Rose. Budget Analyst, Peter Nardoza, Airport. 
RECOMMENDED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 



ADJOURNMENT 

The meeting adjourned at 11:18 a.m. 






City and County of San Francisco 



Printed at 2:47 PM on 10/11/00 



[Budget Analyst Report] 

Susan Horn 

Main Library-Govt. Doc. Section 




CITY AND COUNTY BUB-"^ OF SAN FRANCISCO 

BOARD OF SUPERVISORS 

BUDGET ANALYST 

1390 Market Street, Suite 1025, San Francisco, CA 94102 (415) 554-7642 
FAX (415) 252-0461 



TO: ^Finance and Labor Committee 



DOCUMENTS DEPT. 

October 5, 2000 

OCT 1 1 20C0 



SAN FRANCISCO 
FROM: ^Budget Analyst PUBLIC LIBRARY 

SUBJECT: October 11, 2000 Finance and Labor Committee Meeting 

Item 1 - File 00-1608 

Note: This item was continued by the Finance and Labor Committee at its 
meeting of September 27, 2000. 

1. This is a hearing to consider the release of $1,414,943 in reserved funds in 
the Fire Department's Fiscal Year 2000-01 budget for overtime expenditures. 

2. During the FY 2000-01 budget hearings, the Finance and Labor Committee 
recommended that one third of annual overtime expenditure budget for several City 
departments be placed on reserve so that the Committee can monitor spending for 
overtime during the fiscal year. The Fire Department's approved FY 2000-01 
General Fund budget includes overtime expenditures of $6,475,028. $1,866,591 of 
this amount was placed on reserve, leaving $4,608,437 available for expenditure. 

3. In a letter to the Finance Committee dated September 8, 2000, Acting Chief 
of the Fire Department Tabacco sent a letter to the Finance and Labor Committee 
requesting that the Committee release $1,414,943 of the $1,866,591 in previously 
reserved overtime funds (which would leave $451,648 remaining on reserve. The 
letter attributed high overtime spending through the first 3.5 pay periods of FY 
2000-01 to the following: 

• The need to increase staffing of Fire Department sworn personnel 
assigned to the City's Emergency Communications Center from 40 to 59; 



Memo to Finance and Labor Committee 

October 11, 2000 Finance and Labor Committee Meeting 

• Increased use of sick leave, temporary disability pay and light duty 
associated with pending retirements, causing vacancies in Fire 
Suppression staffing and increased overtime to meet minimum daily 
staffing requirements; and, 

• A high rate of "retirements and retirement payouts" during the first two 
months of the fiscal year. 

4. The Controller's latest projection report for salary and fringe benefit 
expenditures (including overtime) shows that as of the pay period ending September 
15, 2000, the Fire Department has incurred General Fund overtime expenditures of 
$3,861,153. Therefore, through September 15, 2000 (or 5.5 of 26.0 pay periods in FY 
2000-01) the Fire Department has already expended 59.6 percent of its total 
overtime appropriation of $6,475,028, and 83.8 percent of its available, unreserved 
overtime funding of $4,608,437. 

Based on all salary and fringe benefit expenditures incurred during the pay 
period ending September 15, 2000, the Fire Department is projected to spend a total 
of $16,261,167 on overtime which is 151.1 percent or $9,786,139 more than the 
Department's total FY 2000-01 overtime appropriation of $6,475,028. However, the 
Fire Department currently projects that overtime spending will decrease over the 
remaining pay periods of the Fiscal Year, resulting in a total overtime deficit of 
$5,100,000 (see No. 8 below). 

5. The Controller's Office has reviewed budgetary requirements for Firefighter 
premium pay in order to calculate additional funding that would be required from 
the General Fund Salary and Fringe Benefits Reserve. Based on this review, the 
Controller reports that approximately $500,000 will be transferred from the 
General Fund Salary and Fringe Benefits Reserve to the Fire Department's budget 
in order to offset higher than expected premium pay expenditures. 

6. In addition to the Salary and Fringe Benefits Reserve transfer to the Fire 
Department budget, which will decrease the projected overall Fire Department 
budget deficit, the Fire Department estimates that the planned hiring of new 
personnel during the fiscal year will decrease the need for overtime expenditures 
since the new personnel will lessen the need to backfill vacant positions in order to 
meet scheduled st affin g in Fire Suppression. 

7. At the current rate of overtime spending, the Fire Department will exceed the 
$4,608,437 available, unreserved overtime appropriation during the pay period 
ending October 13, 2000. Using the same rate of spending, the Fire Department will 
exceed its total overtime appropriation of $6,475,028 by the end of November of 
2000. Therefore the Fire Department's entire FY 2000-2001 budgeted overtime 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

2 






Memo to Finance and Labor Committee 

October 11, 2000 Finance and Labor Committee Meeting 

funds will be spent with seven months of the fiscal year still remaining (December 
through June of 2001). 

8. The Controller, and the Budget Analyst have reviewed the overall FY 2000- 
2001 spending plan prepared by the Fire Department's Chief Financial Officer, Ms 
Debra Ward. Based on the assumptions used in preparing the spending plan, the 
Controller and the Budget Analyst conclude that the Fire Department's spending 
plan will result a net General Fund supplemental appropriation of approximately 
$4,800,000, including a $5,100,000 deficit for additional overtime, prior to the 
completion of the fiscal year. The key elements comprising the estimated deficit of 
$4,800,000 are listed below: 



Item 


(Deficit) 


Uniform Salaries 


$ 3,800,000 


Miscellaneous Salaries 


( 900,000) 


Retirement Payouts 


(3,000,000) 


Premium Pay 


(800,000) 


Holiday Pay 


200,000 


Overtime 


(5,100,000) 


Charges to Airport 


300.000 


Total Expenditure Deficit 


($5,500,000) 


Increased Inspection Revenue 


700,000 


Net Total 


($4,800,000) 



Comments: 1. The Budget Analyst and the Controller's Office have 

reviewed current staffing for Fire Department sworn personnel 
assigned to the City's Emergency Communications Center 
which has, according to the Chief of the Fire Department, 
increased from 40 to 59 and increased the Fire Department's 
overtime spending in order to backfill the additional staffing 
requirement. The increased staffing has reportedly resulted 
from the change in shift times, since previously dispatchers 
worked 24 hour shifts, and now work 12 hour shifts. Based on 
the review by the Budget Analyst and Controller, we have 
concluded that the change in work schedule resulted in no 
increased overtime spending compared to prior years. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

3 



Memo to Finance and Labor Committee 

October 11, 2000 Finance and Labor Committee Meeting 



2. The Budget Analyst has also reviewed suppression 
overtime shift requirements and absenteeism data for the first 
three months of FY 2000-01. Based on this review, we have 
found that: 

• Overall, the number of overtime shifts required per 
day to meet minimum suppression staffing 
requirements has increased by 23.1 overtime shifts per 
day, from 16.6 per day during the first three months of 
FY 1999-2000 to 39.7 during the first three months of 
FY 2000-01, an increase of 139.2 percent; 

• The number of staff scheduled for suppression duty 
has decreased by 12 Firefighters per day, from 421 
during the first three months of FY 1999-2000 to 409 
per day during the first three months of FY 2000-01, 
reflecting the decreased number of Firefighters 
available due to retirements. 

• The average daily number of Firefighters out on sick 
leave has increased by 3.23 per day or 14.1 percent, 
from 22.87 per day during the first three months of FY 
1999-2000 to 26.1 per day during the first three 
months of FY 2000-01; and, 

• The average daily number of Firefighters out on 
temporary disability has increased by 1.83 per day or 
9.7 percent, from 18.83 per day during the first three 
months of FY 1999-2000 to 20.66 per day during the 
first three months of FY 2000-01. 

• The need to schedule overtime shifts in order to cover 
absences due to vacation does not appear to have 
changed significantly comparing the first three months 
of FY 1999-2000 to the first three months of FY 2000- 
01. 



BOARD OF SUPERVISORS 

BUDGET ANALYST 

4 



Memo to Finance and Labor Committee 

October 11, 2000 Finance and Labor Committee Meeting 

3. If the Finance and Labor Committee approves the release 
of reserved overtime funds in the amount of $1,414,943, total 
funds of $451,648 of the original overtime funding reserve of 
$1,866,591 will remain on reserve and the remaining $451,648 
would require Finance and Labor Committee approval before 
such funds can be released for expenditure. 

Recommendation: Approve the requested release of reserved funds in the amount 
of $1,414,943 and direct the Fire Department to submit 
monthly updates to their spending plan in order to monitor the 
Department's progress in reducing overtime spending rates. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

5 



Memo to Finance and Labor Committee 

October 11, 2000 Finance and Labor Committee Meeting 

R E V I S ED 
October 6, 2000 



Item 2 - File 00-1734 
Department: 

Item: 

Amount: 
Source of Funds: 

Description: 



Budget: 



Department of Children, Youth and their Families 
(DCYF) 

Motion releasing $100,000 placed on Board of Supervisors 
reserve for the Chinatown Youth Center's Positive 
Learning and Activities for Youth program (PLAY). 

$100,000 

General Fund monies reserved in the Fiscal Year 2000- 
2001 Department of Children, Youth and their Families 
budget. 

During the FY 2000-2001 budget hearings, the Board of 
Supervisors approved an appropriation of $100,000 for the 
Chinatown Youth Center's (CYC) PLAY Program and 
placed on a Board of Supervisors reserve, pending 
submission of program budget details. 

Approval of the proposed release of reserved funds in the 
amount of $100,000 would authorize DCYF to enter into a 
contract with Chinatown Youth Center, a nonprofit 
organization. 

The purpose of the PLAY Program is to target recent 
Asian immigrant youth, ages 14 to 17, residing in the 
Chinatown, Tenderloin, Richmond and Sunset 
neighborhoods (see Comment 2). PLAY provides a 
culturally responsive, comprehensive program designed to 
provide services to youth at risk of dropping out of school 
or juvenile delinquency. The services would include 
tutoring, vocational training, computer skills, English as 
a Second Language (ESL) courses, creative arts and field 
trips. 

The summary budget for the proposed contract with 
Chinatown Youth Center for the PLAY program is as 
follows: 



Salaries 
Benefits 

Operating expenses 
Total 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



$56,225 

10,150 

33.625 

$100,000 



Memo to Finance and Labor Committee 

October 11, 2000 Finance and Labor Committee Meeting 



The Attachment, provided by DCYF, contains budget 
details for the summary budget noted above. 

Comments: 1. The Chinatown Youth Center (CYC) is community- 

based multi-service non-profit agency, whose mission is to 
serve and empower youth and their families to become 
responsible members of society. CYC has implemented an 
extensive counseling program with anti-juvenile 
delinquency focus. 

2. According to Mr. Robert Chan of CYC, the PLAY 
Program will serve 40 Asian immigrant youth, ages 14 to 
17 from the Chinatown, Tenderloin, Richmond and 
Sunset neighborhoods. Mr. Chan further states that CYC 
will recruit youths via community, intake and DCYF 
referrals as well as referrals from schools in the 4 
neighborhoods that CYC serves. Mr. Chan states that the 
PLAY Program would be offered to Asian immigrant 
youth with one or more of the following risk factors: 
poverty or economically disadvantaged; limited English 
proficiency; antisocial behavior or exposure to violence or 
gangs; low educational achievement; and, truant or 
dropout. 

3. According to Ms. Nani Coloretti of DCYF, DCYF will 
contract with CYC on a sole-source basis to provide Asian 
youth outreach and support services to ensure academic 
success, develop personal and social competency, foster 
social support systems and enhance job readiness and 
vocational skills. Ms. Coloretti notes that the PLAY 
Program was added to the DCYF budget by the Board of 
Supervisors and was funded for one year. 

Recommendation: Approve the proposed motion. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Attachment 
Page 1 of 3 



CYC-PLAY- 



BUDGET CATEGORY AND LINE-ITEM DETAIL 
Personal Services - Salaries/Employee Benefits 



COST 



Salaries: 

Youth and Family Counselor (Full-time) 1.00 FTE@ 24,000.00 

Youth and Family Counselor (Full-time) 1.00 FTE@ 24,000.00 

Provide outreach, recruitment, recreational activities & field trips. Facilitate vocational 
training workshops, assist the consultant at the workshops, do the intake and need 
assessment and implement all direct services. 

Program Manager (Part-time) 0.10 FTE @ 41,250.00 

Develop program sendees &. curriculum, oversee all project staff &. program managcmcnL 
The Program Manager will convene all meetings with collaborative agencies. 

Program Assistant (Part-time) 0.10FTE@ 21,000.00 

The Program Assistant will perform support function to this program by assisting in 
word processing, copying, and maintaining a control system of all program equipment, 
material and supplies. 



Grants Coordinator (Part-time) 0.05FTE @ 

The Grants Coordinator will coordinate all grant compliance requirements. 



40,000.00 



Youth & Family Counselors, Program Manager, Program Assistant, & Grants 

Coordinator-Fringe Benefits @ 18% 

FICA (7.65% of total salaries x 556,225) 

SUI (Max. 57,000 @ 2.10%x 2.25FTE) 

Workers Compensation @ 1.12% x 556,225) 

Health & Dental Insurance(S 173. 41 /month x 12months x 2.25FTE) 



524,000.00 
524,000.00 



S4.125.00 



52,100.00 



52,000.00 



54,301.00 
5537.00 
$630.00 

$4,682.00 



Total Salaries &. Benefits represent 66.38% of total project cost 



$66375.00 



Attachment 
Page 2 of 3 

CYC-PLAY- 



BUDGET CATEGORY AND LINE-ITEM DETAIL 



B. Operating Expenses 



COST 



TRAVEL Total travel expense represents 1 .86% of the total project cost 

Monthly fast passes for project staff 

Local Travel 2.25 FTE/Monthfor 12 months @$35 

Mileage/Parking 

OFFICE SUPPLIES 

Office supplies including desktop stationary, computer, fax, copier supplies 

$100/month x 12 months represents 1.20% of the total project costs. 



1,260.00 
600.00 



1.200.00 



FACILITY RENTAL Total rental represents 4.80% of total project cost. 
Office Rent : Office space for 2.25 FTE staff. Expenses include rent &. maintenance 
Program Facility Rent: Rental includes conference space for weekly 
activities, tutorial, workshops, counseling rooms and Computer Labs. 
Expense include rent, garbage and maintenance services. 

S400 per month x 12 months 4,800.00 



4 UTILITIES 1 0% of facility rental cost 

PG&E, Water, Garbage and Janitorial 



480.00 



5 TELEPHONE & PAGER 

Expense include telephone/fax, pager, internet access, hot line & cellular for 2.25 FTE 
S200/month x 12 months represents 2.40% of the total project cost. 2,400.00 

6 INSURANCE S85/month x 12 months represents 1.02% of total project 

Expense include general liability, fidelity bond, professional liability and property liability 
insurance. 1,020.00 

7 AUDIT $90/monthx 12 months represents 1.08% of total project 1,080.00 
Expense include annual financial audit and Federal and State income tax return preparation 
fee 



8 FISCAL MANAGEMENT S834/month x 12 months 

Expense include fiscal/ grant management, and accounting services of the project. 
Accountant 0.16FTE@ 34,320 5,491.00 

Fiscal Director 0.05FTE@ 558,520 2,926.00 

Fringe Benefits @ 18.81% 1.583.00 

10,000.00 
Total indirect overhead represents 10% of the total project 



10,000.00 



Sub-total 



Page 1 of 2 



$1,860.00 



$1,200.00 



$4,800.00 



$480.00 



$2,400.00 



$1,020.00 



$1,080.00 



$10,000.00 



$22,840.00 



Attachment 
Page 3 ot 3 

CYC-PLAY- 



BUDGET CATEGORY AND LINE-ITEM DETAIL 
B. Operating Expenses 



10 



PROGRAM SUPPLIES 
Arts &. Crafts Supplies 

$100x12 months 1,200.00 

Monthly field trip expense for 40 youth including transportation entry fees for parks &. 
museums. 

S4.25 per person x 40 youths x 1 2 months 2,040.00 

6 Retreats for 40 youths including transportation entry fees to Marin Headland, bag lunch 
and refreshment. 

S25 per person x 40 youths x 6 times 6,000.00 

1 Graduation Ceremony Buffet Dinner for 40 youths and parents 

S660 x 1 time 660.00 

Total program Supplies represents 9.90% of the total project 



PRINT, COPY & POSTAGE 

$73.75 x 12 months represents 0.89% of the total project. 



88! • 



COST 



S9.900.00 



S885.00 






Sub-total Page 2 of 2 

Total Operating Expense represents 33.62% of total project cost. 



510,785.00 
S33.625.00 



IPROJECT TOTAL 



All pages 



SI 00,000.00 



10 



Memo to Finance and Labor Committee 

October 11, 2000 Finance and Labor Committee Meeting 

Item 3 - File 00-1699 



Department: 
Item: 



Comment: 



Recommendation: 



Airport 

Resolution approving the sub-lease of warehouse space at 
245 South Spruce Avenue, South San Francisco, between the 
Corporation of the San Francisco Fine Arts Museums as sub- 
lesee and the City and County of San Francisco as sub-lessor, 
acting by and through its Airport Commission. 

Mr. Gary Franzella of the Airport states that he will not be 
able to provide information requested by the Budget Analyst 
in time for the October 11 meeting of the Finance and Labor 
Committee meeting. Mr. Franzella therefore requests that 
the proposed resolution be continued for one week until the 
October 18 meeting of the Finance and Labor Committee. 

Continue the proposed resolution for one week as requested 
by the Airport. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

11 



Memo to Finance and Labor Committee 

October 11, 2000 Finance and Labor Committee Meeting 

Item 4 - File 00-1700 



Department: 
Item: 



Description: 



Airport 

Resolution approving the International Terminal 
Equipment Maintenance and Operating Agreement 
between the San Francisco Terminal Equipment 
Company, LLC (SFOTEC) and the City and County of 
San Francisco, acting through its Airport Commission, 
under which SFOTEC would maintain, repair, operate, 
and use Airport-owned equipment and operating systems 
for handling flights and passengers at the Airport's new 
International Terminal. 

The City, acting through the Airport Commission, owns 
certain equipment and operating systems for handling 
flights and passengers at the Airport's new International 
Terminal. The specific equipment (such as passenger 
loading bridges) and operating systems (such as baggage 
handling systems), purchased by the City at a total cost of 
$100,720,419 using Airport Revenue Bond proceeds are 
listed in the Attachment provided by the Airport. 
According to Ms. Dorothy Schimke of the Airport, in 1992 
and 1996 the Board of Supervisors approved the 
supplemental appropriations for the Airport's Master 
Plan which funded the purchase and activation of the 
subject equipment and operating systems. 

Twenty-two of the 24 airlines with leases at the new 
International Terminal have formed a consortium, the 
San Francisco Terminal Equipment Company, LLC 
(SFOTEC) l , to (a) maintain, repair, operate, and schedule 
the use of the City-owned equipment and operating 
systems at the new International Terminal, (b) maintain, 
operate, and schedule the use of the new International 
Terminal's joint use ticket counters and gates, and (c) 
allocate the associated costs related to the City-owned 
equipment and operating systems among the airline 
users. Under the subject International Terminal 



1 According to Ms. Schimke, it is a business decision for each airline whether or not to join the 
SFOTEC consortium. Of the 24 airlines with leases at the new International Airport, only Aeroflot 
Russian International Airlines and Lineas Areas Costarricenses (LACSA), SA. have so far chosen 
not to participate. The primary advantage of participating in the SFOTEC consortium is the lower 
cost of using the equipment and operating systems covered by the subject agreement. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

12 



Memo to Finance and Labor Committee 

October 11, 2000 Finance and Labor Committee Meeting 



Equipment Maintenance and Operating Agreement, the 
City would license to SFOTEC the right to, and SFOTEC 
would accept the obligation to, maintain, repair, operate, 
and use the City-owned equipment and operating systems 
listed in the Attachment. SFOTEC would pay a projected 
annual fee of $4,566,000 to the Airport to reimburse the 
Airport for all debt service costs for that portion of the 
Airport Revenue Bond proceeds which were used by the 
Airport to purchase the equipment and operating systems 
at a total cost of $100,720,419. In addition, SFOTEC 
would also reimburse the Airport for the Airport's actual 
custodial service costs and utility charges. SFOTEC 
would allocate all debt service, custodial service, and 
utility charge costs between the airline users of the new 
International Terminal according to the formula outlined 
in Comment No. 3 below. 



Term of Agreement: 



Ms. Schimke states that the subject agreement between 
SFOTEC and the Airport would commence on the date it 
is fully executed following Board of Supervisors approval 
and would terminate on September 30, 2005. This is 
anticipated to be a term of four years and ten months 
(which is one month longer than the anticipated fee 
payment period which is determined by the date on which 
the new International Terminal is fully operational). 
According to Ms. Schimke, after the termination date, the 
Airport could either (a) negotiate a new agreement with 
SFOTEC, (b) negotiate a new agreement with a third 
party, or (c) resume responsibility for maintaining, 
repairing, and operating the equipment and operating 
systems itself. If option (c) was chosen, the Airport would 
then be reimbursed by the airlines through the annually 
calculated landing fee rates and terminal building rental 
rates paid by the airlines to the Airport. 



Fees Payable Under 
the Agreement by 
SFOTEC to the 
Airport: 



SFOTEC would pay the Airport $380,500 per month, for a 
total annual amount of $4,566,000 per year, to fully cover 
the Airport's annual debt service costs to pay off that 
portion of the Airport Revenue Bond proceeds which the 
Airport used to purchase the equipment and operating 
systems at a total cost of $100,720,419. This debt service 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

13 



Memo to Finance and Labor Committee 

October 11, 2000 Finance and Labor Committee Meeting 



cost covers all related bond interest, redemption, and 
financing costs. SFOTEC payments would begin on the 
date on which the new International Terminal becomes 
fully operational, which is currently projected to be 
December 10, 2000. Therefore, between December 10, 
2000, and the agreement termination date of September 
30, 2005 (a period of approximately four years and nine 
months), SFOTEC would pay the Airport a total fee 
amount of approximately $21,688,500 which would cover 
the full debt service costs of that 57 month period. The 
full debt service costs related to the $100,720,419 
purchase of equipment and operating systems will be paid 
over a longer period (potentially up to 30 years given the 
Life of the Airport Revenue Bonds, subject to future 
refinancing). The subject agreement represents four 
years and nine months of that longer repayment period. 
In addition, SFOTEC would also reimburse the Airport 
for the Airport's actual custodial service costs and utility 
charges. SFOTEC would allocate all debt service, 
custodial service, and utility charge costs between the 
airline users of the new International Terminal according 
to the formula outlined in Comment No. 3 below. 

Since the fee amount paid by SFOTEC is intended to fully 
cover the Airport's debt service costs, the fee could 
increase or decrease based on (a) refinancing of the debt 
service on the underlying bonds which were issued by the 
City to purchase the equipment and operating systems, 
and (b) any additional bonds sold to finance further 
equipment purchases. 



Source of Funds: 



Airport Revenue Bond funds previously appropriated by 
the Board of Supervisors to pay for the Airport's Master 
Plan. According to Ms. Schimke, additional bonds could 
be issued during the term of the agreement if the Airport 
purchases additional equipment and/or operating systems 
to replace worn out or outdated equipment and operating 
systems. However, Ms. Schimke states that no new 
purchases of equipment or operating systems are planned 
?t this time. 



Comments: 



1. Ms. Schimke states that the monthly fee amount of 
$380,500 was determined on the basis of full cost 
recovery. The amount of $380,500, therefore, fully covers 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

14 



Memo to Finance and Labor Committee 

October 11, 2000 Finance and Labor Committee Meeting 



tbe debt service and related financing costs paid by the 
Airport for the purchase of the equipment and operating 
systems listed in the Attachment. 

2. In addition to the monthly fee, SFOTEC would also 
reimburse the Airport for: 

• The actual costs of custodial services associated with 
the Airport-owned equipment and operating systems. 
Such custodial services are projected to cost $600,000 
per year. 

• The actual utility charges associated with the Airport- 
owned equipment and operating systems, which are 
projected to cost $2,274,000 per year. According to Ms. 
Schimke, such charges would be based on meter 
readings. 

3. SFOTEC would allocate all of the costs payable to the 
Airport under the subject agreement to its 22 members 
and the non-member airline users 2 of International 
Terminal equipment and operating systems in accord 
with the terms of the SFOTEC's Member Agreement, an 
agreement which is (a) separate and distinct from the 
subject International Terminal Equipment Maintenance 
and Operating Agreement between SFOTEC and the 
Airport, and (b) not subject to Board of Supervisors 
approval. Presently two of the airlines with leases at the 
new International Terminal are not members of SFOTEC. 

Once non-member airline users' fees (which are 
negotiated between the airlines) have been paid, the total 
net facility charges are allocated by SFOTEC to its 
member airlines on the basis that: 

• 10 percent of payments would be based upon equal per 
capita sharing among all 22 SFOTEC members. 

• 45 percent of payments would be based upon each 
SFOTEC member's number of flights. 



2 According to Ms. Schimke, the non-member airlines include (a) the two airlines with leases at the 
new International Terminal which are not SFOTEC members (Aeroflot and LACSA), (b) charter 
airlines, and (c) airlines whose San Francisco International Airport flight operations are handled by 
airlines with leases. The number of non-member airlines will vary over time. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

15 



Memo to Finance and Labor Committee 

October 11, 2000 Finance and Labor Committee Meeting 



• 45 percent of payments would be based upon each 
SFOTEC member's number of passengers arriving at 
and departing from the new International Terminal. 

4. Prior to the day on which the new International 
Terminal is projected to become fully operational, which is 
currently projected to be December 10, 2000, the Airport 
will pay all the costs associated with training and testing 
the equipment and operating systems with live aircraft 
operations. This training and testing, which Ms. Schimke 
states is estimated to cost approximately $1,600,000, is 
part of the Airport's responsibility to activate all the new 
International Terminal's operating systems and, 
therefore, is funded from the supplemental appropriations 
previously approved by the Board of Supervisors for the 
Airport's Master Plan 3 . Prior to the date of the new 
International Terminal's full operation, the Airport will 
be responsible for all maintenance and repairs of the 
equipment and operating systems listed in the 
Attachment except for damage resulting from SFOTEC 
operations which would be paid by SFOTEC. 

5. Upon termination or expiration of the subject 
agreement, SFOTEC would cease to have any rights to 
the equipment or operating systems. Under the subject 
agreement, the City could allow SFOTEC to continue 
paying fees to hold over SFOTEC's use of equipment and 
operating systems on a month-to-month basis after the 
subject agreement's expiration or termination. SFOTEC's 
month-to-month fee would be set at the monthly fee 
applicable during the month preceding the subject 
agreement's expiration or termination. According to Ms. 
Schimke, the month-to-month holdover provision is a 
standard provision which would allow the Airport extra 
negotiation time in the event of unforeseen circumstances. 
There is no maximum number of months for which the 
month-to-month holdover provision could apply. 



3 According to Ms. Schimke, the $1,600,000 budget is as follows: 

(1) Security staff, passenger screening checkpoints, and baggage security $570,000 

(2) Baggage systems testing and interim maintenance 790,000 

(3) Terminal systems support (operation of flight information displays and 240.000 
other communications equipment) 

$1,600,000 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

16 



Memo to Finance and Labor Committee 

October 11, 2000 Finance and Labor Committee Meeting 



However, Ms. Schimke states that all of the subject 
agreement's provisions, except for those relating to the 
agreement's length of term, would remain the same. 
Therefore, any increased debt service costs for the Airport 
would trigger an increase in the fee paid by SFOTEC 
during the holdover period. 

6. In the event that SFOTEC considers that equipment 
or operating systems require replacement, SFOTEC 
would provide the City with a written recommendation for 
such replacement. In the event that the City agrees with 
the recommendation, the City would replace the 
equipment and/or operating systems, and would then 
increase SFOTEC's fee under the subject agreement to 
cover the City's cost of acquiring the new equipment 
and/or operating systems. According to Ms. Schimke, 
such amended fees will not be subject to separate Board of 
Supervisors approval since, by approving the subject 
resolution, the Board of Supervisors would have already 
approved the method for setting the fee level. However, 
Ms. Schimke states that any future equipment and/or 
operating system purchases not paid for by existing 
Master Plan funds would require appropriation approval 
by the Board of Supervisors. 

In the event the City disagrees with SFOTEC's 
replacement recommendations, the City is not required to 
replace the said equipment or operating systems so long 
as it is not withholding its consent unreasonably. Ms. 
Schimke advises that SFOTEC would still be able to 
purchase the equipment or operating systems itself and 
retain it as SFOTEC-owned equipment. Ms. Schimke also 
notes that both the Airport and SFOTEC share an equal 
interest in maintaining safety standards and Federal 
Aviation Authority requirements. 



Recommendation: Approve the proposed resolution. 



BOARD OF SUPERVISORS 

BUDGET ANALYST 

17 



Memo to Finance and Labor Committee 

October 11, 2000 Finance and Labor Committee Meeting 




Harvey M. Rose 



Supervisor Yee 
Supervisor Bierman 
President Ammiano 
Clerk of the Board 
Controller 
Steve Kawa 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

18 



SFIA DEFT. OF AV1ATK 



(650)8214535 (THU) 10. 5' 00 14 :45/ST. 14-.45/NO. 4861718717 P 2 



Attachment 



City-Owned International Terminal Equipment 
Maintained and Operated by SFOTEC 





Total Cost 


Debt Service 


Baggage Handling Security Screening 


4,083,862 


176,427 


Common Use Terminal Equipment (CUTE 


8,317,849 


370,093 


Gate Management System (GMS) 


1,455,359 


64,755 


Baggage System Security Screening Devices 


4,794,000 


211,731 


Preconditioned Air 


4,438,416 


203,964 


Ground Power 


2,552,003 


118,990 


Aircraft Docking 


391,680 


18,263 


Gateroom Podiums 


714,000 


33,292 


Jetbridges 


14,780,008 


689,143 


Potable Water 


1,060,800 


49,462 


Gateroom Seating 


3,672,000 


170,265 


Baggage System Security Screening Devices 


50,357,442 


2.245,447 


Radio Frequency ID Baggage Tracking 


4,103,000 


213,731 




100,720,419 


4,565,563 
Round to 

4,566,000 



19 




City and County of §an Francisco 

Meeting Minutes 

Finance and Labor Committee 

Members: Supervisors Leland Yee, Sue Bierman, Tom Ammiano 
Clerk: Mary Red 



[All Committees] 

Government Document Section 

Main Library 



Wednesday, October 18, 2000 10:00 AM City Hall, Room 263 

Regular Meeting 

Members Present: Leland Y. Yee, Sue Bierman, Tom Ammiano. 

DOCUMENTS PEP" 



Meeting Convened OCT 2 3 2G00 

SAN FRANCISCO 

The meeting convened at 10:06 a.m. PI JRI IP I IRRARY 

001743 [Government Funding, Department of Consumer Assurance (formerly Dept. of AgricultureAVeights and 
Measure), to combat a disease deadly to grape vines] 
Supervisor Newsom 

Ordinance appropriating S53,500 of other state grants and subventions to fund a program to control the spread 
of glassy winged sharpshooter pest that threatens the wine industry of Northern California, for the Department 
of Consumer Assurance for fiscal year 2000-2001. (Controller) 

(Companion measure to File 001742.) 

10/4/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; David Frieders, Deputy Director, Department 

of Consumer Assurance. 

Amendment of the Whole placing $8,321 on reserve; changing 6218 position to "G"; and providing 

retroactivity to September 1, 2000. 

AMENDED, AN AMENDMENT OF THE WHOLE BEARING NEW TITLE. 

Ordinance retroactively appropriating S53,500 of other state grants and subventions to fund a program to 
control the spread of glassy winged sharpshooter pest that threatens the wine industry of Northern California, 
for the Department of Consumer Assurance for fiscal year 2000-2001, reserving S8,321 for potential overtime 
expenses. (Controller) 

(Companion measure to File 001742.) 
RECOMMENDED AS AMENDED by the following vote: 

Ayes: 3 - Yee, Bierman, Ammiano 



001742 [Public Employment, Department of Consumer Assurance (formerly Dept. of Weights and Measure)] 

Ordinance amending Ordinance No. 181-00 (Annual Salary Ordinance, 2000/01) reflecting the creation of 
1.25 positions (Class 6218 Inspector Trainee) in the Department of Consumer Assurance. (Human Resources 
Department) 

10/4/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. ' 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; David Frieders, Deputy Director, Department 
of Consumer Assurance. 
RECOMMENDED by the following vote: 
Ayes: 3 - Yee, Bierman, Ammiano 

City and County of San Francisco I Printed at 12.13 PM on 10/19/00 



Finance and Labor Committet 



Meeting Minute) 



October 18, 2000 



001707 |Lease of office space at 3801 Third Street, for DHS-Family and Children Services Program| 

Resolution authorizing the lease of real property at 3801 Third Street, Suite 1 14, 205 and 235 for the 
Department of Human Services. (Real Estate Department) 
10/4/00. RECEIVED AND ASSIGNED lo Finance and Labor Committee 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst, Tony DeLucchi. Real Estate Department 
Amendment of the mole to address construction cost issues. 
AMENDED, AN AMENDMENT OF THE WHOLE BEARING SAME TITLE. 
RECOMMENDED AS AMENDED by the following vote: 
Ayes: 3 - Yee, Bierman. Ammiano 



001715 (This project will reduce odors and air pollution in the Bayview/Hunters Point Neighborhood from the 
discharge of raw digester gas into atmosphere| 

Resolution approving the design-build agreement for the Southeast Cogeneration Facility Contract, CS-520. 
(Public Utilities Commission) 

(Fiscal impact.) 
• 9/27/00, RECEIVED AND ASSIGNED to Finance and Labor Committee 

Heard in Committee. Speakers Haney Rose, Budget Analyst; David Henzl. Hetch Hctchy. Water and Power, 
Supenisor Yee; Supervisor Ammiano; Mane Harrison, Espanola Jackson; Kevin Barry, Local 39. 
Continued to November 15, 2000. 
CONTINUED by the following vote: 

Ayes: 3 - Yee, Bierman. Ammiano 



001412 [Butterfly Museum] 
Supervisor Bierman 

Hearing to consider the status of the Environmental Impact Report and fund raising campaign for the proposed 
Butterfly Museum. 

7/31/00, RECEIVED AND ASSIGNED to Transportation and Land Use Committee 
9/26/00, TRANSFERRED to Finance and Labor Committee. 
10/4/00, CONTINUED. Continued to October 18, 2000. 

Heard in Committee. Speakers: Supervisor Bierman. Hillary Guelman. Environmental Review Officer, 
Planning Department; Supervisor Becerril; Eula Walters. Citizens for Open Space; Susan Tibbon; David 
Graves, Kids for Parks; Arron Pesken. Telegraph Hill Dwellers ; female student. Urban High School; Norman 
Rolfe, San Francisco Tomorrow; Arnold Levine; Gloria Gonzalez. Bill Wilson. Michael DeSunzio; Barbara 
Deutech; Andrea O'Leary; Betty McGovern. Park Rescue; Brian Sullivan; Janet Morcom. Golden Gateway 
Residents Association; Lawrence Temey. May Day 2001; Steve Williams. Golden Gateway Common; Esther 
Waeste; Maria Matson; Carol Blair, S F. Tree Council; Megan Levinton; Tom Flowers; Ernestine Weiss; 
Denise D'Anne; Bob Coleman; Angela Chung Lee. Korean American Association; Supervisor Ammiano. 
CONTINUED TO CALL OF THE CHAIR by the following >ote: 
Ayes: 3 - Yee, Bierman, Ammiano 



City and County of San Francisco 



Printed at 12.13 P.\f on 10.1 9 V0 



Finance and Labor Committee Meeting Minutes October 18, 2000 



001324 [Bayview Hunters Point Foundation] 
Supervisor Ammiano 

Hearing to inquire into: (1) the fiscal condition and budget of the Bayview Hunters Point Foundation, (2) the 
status of the contract negotiations between the City, the BHPF, and SEIU Local 790; (3) the status of the 
technical assistance funded by the City and other issues pertaining to contract negotiations. 
7/17/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 
Continued to October 25, 2000. 
CONTINUED by the following vote: 
Ayes: 3 - Yee. Bierman, Ammiano 



ADJOURNMENT 

The meeting adjourned at 11:40 a.m. 



City and County of San Francisco 3 Printed at 12.13 PM on IO.'19/OO 



[Budget Analyst Report] 

Susan Horn 

Main Library-Govt. Doc. Section 



CITY AND COUNTY (itJSUl) 0F SAN FRANCISCO 




y< 



00 



BOARD OF SUPERVISORS 

BUDGET ANALYST 

1390 Market Street, Suite 1025, San Francisco, CA 94102 (415) 554-7642 

FAX (415) 252-0461 

October 12, 2000 

TO: Finance and Labor Committee 

FROM: Budget Analyst 

SUBJECT: October 18, 2000 Finance and Labor Committee Meeting 

Items 1 and 2 - Files 00-1743 and 00-1742 

Department: Department of Consumer Assurance, Regulatory 

Compliance and Agricultural Standards 

Items: Supplemental Appropriation ordinance of $53,500 of State 

grants and subventions to fund a program to control tbe 
spread of tbe Glassy Winged Sbarpsbooter pest tbat 
threatens the wine industry of Northern California (File 
00-1743). 

Ordinance amending the FY 2000-01 Annual Salary 
Ordinance (No. 181-00) to reflect the creation of 1.25 
positions in the Department of Consumer Assurance (File 
00-1742). 

Amount: $53,500 

Source of Funds: California Department of Food and Agriculture, Contract 
No. 990808 for up to $76,180 



DOCUMENTS DEPT. 
OCT 1 8 2000 

SAN FRANCISCO 
PUBLIC LIBRARY 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 



Budget: 



Permanent Salary 

1 6218 Inspector Trainee 
Temporary Salary 

.25 1424 Clerk Typist 
Fringe Benefits 
Other Current Expenses 
Materials and Supplies 
Total 



$23,215 

5,000 

6,035 

11,000 

8.250 

$53,500 



Description: On May 22, 2000, the California Department of Food and 

Agriculture entered into an agreement with the City and 
County of San Francisco, through the Department of 
Consumer Assurance, for the State to fund up to $76,180 
to implement a program from March 1, 2000 through 
June 30, 2001 to help control the spread of the Glassey 
Winged Sharpshooter. The Glassey Winged Sharpshooter 
is an insect that can host and feed on a wide variety of 
ornamental and crop plants, but is a particular threat to 
California vineyards due to its ability to spread the 
bacterium that causes Pierce's disease. Pierce's disease is 
deadly to grapevines and there is no effective treatment 
for Pierce's disease. The Glassy Winged Sharpshooter is 
now found throughout southern California and is 
threatening to move into northern California. Since the 
funding for the agreement between the State and the City 
was not finalized until after the City's FY 2000-01 budget 
was approved, these funds were not included in the City's 
annual budget. 

The proposed Annual Salary Ordinance (File 00-1742) 
would create two new positions (one full-time 6218 
Inspector Trainee and one .25 1424 Clerk Typist), for a 
total of 1.25 FTE positions. The proposed supplemental 
appropriation ordinance (File 00-1743) for $53,500 would 
be used to fund these two new positions and related 
expenses, including rent of renovated additional space 
and materials and supplies. 

The 6218 Inspector Trainee position would be responsible 
for performing inspections and examining plants in San 
Francisco pertaining to the existence of the Glassy 
Winged Sharpshooter insect for egg masses and live 
insects at nurseries, landscapers and the wholesale flower 
market, in addition to the terminals of United Parcel 
Service (UPS), Federal Express and the Post Office. Mr. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 

Sid Baker of the Department of Consumer Assurance 
advises that in addition to these inspections, the 6218 
Inspector Trainee would be responsible for trapping, 
identification, containment and return of the suspected 
insects and plants to the location from which they were 
shipped, with the costs to return the plants to be paid by 
the original shipper. According to Mr. Baker, the proposed 
program will not involve any spraying or treatment of the 
insects or plants. Mr. Baker advises that the 6218 
Inspector Trainee would also not be responsible for 
inspections at the San Francisco Airport, which will be 
under the jurisdiction of the San Mateo County 
Agriculture Department. The proposed 1424 Clerk Typist 
position would be responsible for maintaining the records, 
files and reports required for this State program. 

Comments: 1. Mr. Baker advises that most of the neighboring 

counties have also applied for these State funds, and are 
implementing similar programs in their jurisdictions, 
including Marin, Contra Costa, Alameda, San Mateo, 
Napa and Sonoma Counties. According to Mr. Baker, 
existing staff in the Department of Consumer Assurance 
have already found Glassy Winged Sharpshooter egg 
masses in shipments of landscaped products in San 
Francisco. 

2. Mr. Baker advises that, as noted above, the City 
entered into an agreement with the State for the State to 
fund up to $76,180 to help control the spread of the 
Glassey Winged Sharpshooter for the period from March 
1, 2000 through June 30, 2001. However, Mr. Baker 
advises that this agreement is a billable contract for the 
hours worked. According to Mr. Baker, the $53,500 
included in the subject supplemental appropriation was 
based on an estimate of the number of hours that could be 
billed assuming a start date of September 1, 2000 through 
June 30, 2001. 

3. Given the delay in the submittal of the subject 
ordinances to the Board of Supervisors, Mr. Baker 
estimates that the two positions would not be hired and 
begin billing hours to this contract until at least mid- 
November, 2000. Therefore, assuming a start date of 
November 15, 2000, the cost for the proposed two 
positions can be reduced, as shown below: 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 

Proposed Supplemental Recommended 

Based on a Start Date Amount Based on Recommended 
of 9/1/2000 a Start Date of 11/15/00 Reductions 

Funding Sources 

Other State Grants and Subventions 

$53,500 $45,179 $8,321 

Funding Uses 

Permanent Salary - 1.0 6218 Inspector Trainee 

$23,215 $17,555 $5,660 

Temporary Salary - 0.25 1424 Clerk Typist 

$5,000 $3,810 $1,190 



Fringe Benefits 






$6,035 


$4,564 


$1,471 


Other Current Expenses 






$11,000 


$11,000 





Materials and Supplies 






$8,250 


$8,250 





Totals 






$53,500 


$45,179 


$8,321 



As shown above, although the 1424 Clerk Typist position 
is funded with Temporary Salary funds, the one 6218 
Inspector Trainee position is funded with Permanent 
Salary funds. Mr. Baker advises that when the subject 
agreement and associated State funding ends on June 30, 
2001, these positions will be terminated. Therefore, the 
one 6218 Inspector Trainee position should be coded as a 
"G" position to specifically designate this permanent 
position as a grant funded position, to ensure that the 
subject positions will be terminated when the State funds 
supporting these positions ends. 

4. Mr. Baker advises that the $8,250 for Materials and 
Supplies is for the one-time cost of purchasing personal 
computers, a printer, related software, Department of 
Telecommunications and Information Services (DTIS) 
support, desks, chairs and related lab equipment needed 
for the proposed program. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 



5. According to Mr. Baker, the $11,000 of costs for Other 
Current Expenses is intended to cover the cost of renting 
additional renovated space at 501 Cesar Chavez Street, 
adjacent to the existing Weights and Measures staff, 
retroactive to September 1, 2000 through June 30, 2001, 
at a total cost of $9,300 ($930 per month for ten months). 
This additional leased space costs $1.55 per square foot 
for 600 square feet of space, which Mr. Tony Delucchi of 
the Department of Real Estate advises is in the low range 
of the fair market rate for this space, especially given the 
increasingly high costs of rental property currently in the 
City. Mr. Baker reports that this additional space was 
leased as of September 1, 2000 and the Department is 
currently incurring the costs of this additional space, 
which would be repaid with the subject State funds. 
Therefore, approval of the proposed supplemental 
appropriation (File 00-1743) should be approved 
retroactive to this September 1, 2000 lease date. In 
addition, Mr. Baker advises that the leased space needed 
to be retrofitted to add a lab table, sink and bench area at 
an estimated one-time cost of $1,700, for a total estimated 
cost of $11,000. 

According to Mr. Baker, at the conclusion of the subject 
Glassy Winged Sharpshooter State Program, the 
Department of Consumer Assurance intends to continue 
to rent this additional space, effective July 1, 2001, at a 
monthly cost of $930 ($11,160 annually) for the laboratory 
and storage needs of the existing Weights and Measures 
Inspectors and other Department of Consumer Assurance 
staff. Mr. Baker reports that the cost for such additional 
leased space would be included in the Department's FY 
2001-02 operations budget, which is primarily funded 
with State and General Fund revenues. The Budget 
Analyst notes that approval of this leased space at an 
additional annual State or General Fund cost of $11,160 
for the Department's ongoing operational needs would be 
subject to the Mayor and Board of Supervisors approval 
during the FY 2001-02 budget process. The Budget 
Analyst would review this request for additional space 
during the FY 2001-02 budget review. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 

Recommendations: 1. Reduce the proposed supplemental appropriation 
ordinance (File 00-1743) by $8,321 from $53,500 to 
$45,179 for Permanent and Temporary Salaries and 
the related Fringe Benefits, as detailed in Comment 
No. 3, in order to reflect a start date of November 15, 
2000 instead of September 1, 2000. 

2. Amend the proposed supplemental appropriation 
ordinance (File 00-1743) and the Annual Salary 
Ordinance (File 00-1742) to designate the one 6218 
Inspector Trainee as a G, grant-funded position. 

3. Amend the proposed supplemental appropriation 
ordinance (File 00-1743) to provide for retroactive 
approval of the subject funds to September 1, 2000 to 
cover the cost for the lease of additional space. 

4. Approve the proposed ordinances, as amended. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 



Item 3 - File 00-1707 
Department: 

Item: 

Location: 
Purpose of Lease: 

Lessor: 

Lessee: 

No. of Sq. Ft. and 
Cost Per Month: 



Annual Cost: 

Term of Lease: 

Utilities and 

Janitorial 

Services: 



Department of Human Services (DHS) 

Department of Administrative Services, Division of Real 

Estate (DRE) 

Resolution authorizing a new lease of real property at 3801 
Third Street, Suites 114, 205, and 235, for the Department of 
Human Services (DHS), Family and Children Services 

3801 Third Street, Suites 114, 205, and 235 

To permit the relocation of 34 existing positions and 5 new 
positions in the Department of Human Services, Family and 
Children Services to a location that is closer to most of their 
clients, which are in the Bayview community. 

Bayview Plaza, LLC 

City and County of San Francisco 



9,207 square feet at approximately $2.00 per square foot per 
month, for a total of $18,414 per month ($220,968 annually). 
In addition, the City would pay the lessor $666.67 per month 
($8,000 annually) for the five-year duration of the lease, or 
approximately $40,000, which includes simple interest at a 
rate of 10 percent, or an annual interest rate of 1.92 percent 
over the five year lease, to reimburse the lessor for the cost of 
approximately $36,364 in tenant improvements made by the 
lessor. Also, the rent would be subject to annual CPI 
adjustments. 

$228,968 

December 1, 2000 through November 30, 2005 (five years). 



The City would be required to pay utilities and janitorial 
services, which Ms. Claudine Venegas of DRE estimates 
would be approximately $0.25 per square foot per month, or 
approximately $2,302 per month ($27,624 annually). 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 

Right of Renewal: None. 



Source of Funds: 



Description: 



Budgeted funds from DHS's FY 2000-2001 budget, as 
previously approved by the Board of Supervisors. 

According to Mr. Randy Roebuck of DHS, the proposed leased 
premises would be occupied by a total of 34 existing positions 
and 5 new positions, or a total of 39 positions all previously 
approved in the FY 2000-2001 budget by the Board of 
Supervisors. These 39 positions would consist of staff from 
the following seven Family and Children Services Units: (1) 
The Foster Care Licensing Unit, which recruits, trains, and 
licenses foster parents; (2) The Foster Care Eligibility Unit, 
which determines whether Federal and/or State funding 
sources are available to parents who would provide foster 
care for a given child; (3) The Guardianship Interstate 
Compact on the Placement of Children Unit, which monitors 
San Francisco children placed in foster homes outside of 
California, and out-of-state children who are placed in foster 
homes in San Francisco; (4) The Family Preservation Project, 
which provides peer counseling to parents; (5) The Rate 
Setter and Child Care Liaison Unit, which reimburses foster 
parents for costs not covered by regular funding sources; (6) 
The Faith Initiative Project, which helps churches work with 
families to prevent removal of a child from a family and 
placement into foster care, and (7) The Foster Parent Kinship 
Resource Room, which provides counseling and literature to 
foster parents. 

Suite 114 of the proposed leased premises at 3801 Third 
Street, consisting of 1,340 square feet, would be occupied by 
a total of one Family and Children Services staff person from 
the Foster Care Resource Room, as part of DHS's desire to be 
located in the Bayview Hunters Point area where most of its 
clients live. While the one employee would have a total of 
approximately 1,340 square feet, the Foster Care Resource 
Room will contain a conference room and a training room for 
foster parents. Currently, the Foster Care Resource Room 
occupies approximately 200 square feet at the City-leased 
building at 225 Valencia Street. DHS plans to use the space 
formerly occupied by this Room to expand other DHS Family 
and Children Services Units, according to Mr. Roebuck (see 
Comment No. 3). 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 

Suite 200 of the proposed leased premises, consisting of 6,122 
square feet, would be occupied by a total of 24 existing 
Family and Children Program staff, including the Foster 
Care Licensing Unit and the Foster Care Eligibility Unit, as 
part of DHS's desire to be located in the Bayview Hunters 
Point area where most of its clients live. Suite 200 would also 
be occupied by 3 new Family and Children Program 
employees, who would constitute the Family Preservation 
Project. Therefore, a total of 27 employees would each have 
an average of approximately 227 square feet. Currently, the 
24 existing employees occupy approximately 4,800 square 
feet, or an average of approximately 200 square feet per 
employee, at the City-leased building at 225 Valencia Street 
(the Foster Care Licensing Unit) and at the City-owned 
building at 170 Otis Street (the Foster Care Eligibility Unit). 
DHS plans to use the spaces formerly occupied by these 
employees to expand other DHS Family and Children 
Services Units, according to Mr. Roebuck. 

Suite 235 of the proposed leased premises, consisting of 1,745 
square feet, would be occupied by a total of nine existing 
Family and Children's Program staff, including the 
Guardianship Interstate Compact on the Placement of 
Children Unit and the Rate Setter and Child Care Liaison 
Unit, as part of DHS's desire to be located in the Bayview 
Hunters Point area where most of its clients live. Suite 235 
would also be occupied by two new Family and Children 
Program employees, who would constitute the Faith 
Initiative Project. Therefore, a total of 11 employees would 
each have an average of approximately 159 square feet. 
Currently, the nine existing employees occupy approximately 
1,800 square feet, or an average of approximately 200 square 
feet per employee, at the City-leased building at 225 
Valencia Street (the Rate Setter and Child Care Liaison 
Unit) and at the City-owned building at 170 Otis Street (the 
Guardianship Interstate Compact on the Placement of 
Children Unit). DHS plans to use the spaces formerly 
occupied by these employees to expand other DHS Family 
and Children Services Units, according to Mr. Roebuck. 

Comments: 1. According to Ms. Venegas, the proposed rent of $2.00 per 

square foot represents fair market value. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 

2. According to the terms of the proposed lease, the City- 
would have the first right of refusal on other space that may 
become available in the 3801 Third Street facility. 

3. According to Mr. Roebuck, all of the space that would be 
vacated by the five existing Units 1 that would occupy the 
building at 3801 Third Street would be filled by personnel 
from other DHS Family and Children Services Units that are 
undergoing expansion. Mr. Roebuck states that the 
expansion consists of an additional 28 new positions 
previously approved by the Board of Supervisors in the DHS 
FY 2000-2001 budget, which have been added to various 
Units of Family and Children Services. If the new subject 
lease space at 3801 Third Street is approved, it would result 
in vacating a total of approximately 6,800 square feet of 
space in the 225 Valencia Street and 170 Otis Street 
buildings, to be used by other DHS Units. Mr. Roebuck 
estimates that in total 34 employees from other DHS Units 
would fill the vacated space at 225 Valencia Street and 170 
Otis Street, which would provide an average of 200 square 
feet per employee, in order to (a) provide for the expanded 
programs of DHS Family and Children Services Units (b) 
alleviate various overcrowded conditions, and (c) consolidate 
employees performing similar functions at one location. 

4. According to Ms. Venegas, the $40,000 in estimated 
renovation costs, including ten percent simple interest over 
five years (or 1.92 percent annually), represents a maximum 
estimate. The proposed resolution and proposed lease both 
currently state that the City will make payments based on 
construction costs, including interest, of $40,000. However, 
Ms. Venegas notes that construction costs could be less than 
this maximum estimate. Thus, the proposed resolution 
should be amended to provide that the City would make 
monthly payments to amortize $40,000, or would make 
monthly payments to amortize the actual cost of construction 
at 10 percent interest, whichever is the lesser of the two. 

Recommendations: 1. Amend the proposed resolution to provide that the City 
would make monthly payments to amortize $40,000, or 
would make monthly payments to amortize the actual cost of 



1 According to Mr. Roebuck, two of the seven Units that would occupy the proposed lease space are 
new, and do not currently occupy any space. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 



construction, plus 10 percent interest, whichever is the lesser 
of the two, in accordance with Comment No. 4. 

2. Approve the proposed resolution, as amended. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



i i 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 



Item 4 - File 00-1715 
Department: 



Public Utilities Commission (PUC) 



Item: 



Contract 
Amount: 



Source of Funds: 



Resolution authorizing a Design-Build Contract between 
the PUC and the Sierra Diesel Detroit Allison (SDDA) 
company to construct a Cogeneration Facility at the 
Southeast Water Pollution Control Plant. 



The subject resolution would approve a Design-Build 
Contract between the City and Sierra Diesel Detroit Allison 
(SDDA) in an amount not to exceed $3,181,743. According 
to Ms. Laurie Park of the PUC, Acting General Manager of 
Hetch Hetchy, the maximum amount the PUC would be 
authorized to pay SDDA under the subject contract is 
$3,181,743. However, the proposed contract states that, if 
necessary, the PUC would be authorized to adjust the total 
contract amount downward, based on the liquidated 
damages outlined m Comment No. 10 below. 

Renewable Energy Generation Project Appropriation, 
Hetch Hetchy FY 2000-2001 Budget 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

12 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 



Budget: 



A summary budget for the proposed $3,181,743 contract 
with Sierra Diesel Detroit Allison is as follows: 



Project 


Amount 


Installation of Cogeneration Engine 


8794,147 


Design and Construction of Engine 


770,066 


Electrical Instrumentation Equipment 


216,475 


Fuel System 


170,703 


Overhead 


117,159 


Interest Expense 


112,028 


Engineering and Management 


89,000 


Labor for Engine Components 


65,065 


Cooling System 


64,150 


Exhaust System 


53,908 


Additional digester gas storage 


41,500 


Miscellaneous Expenses* 


39,015 


Radiator Cooling System 


33,438 


Lubrication System 


30,220 


Starting System 


25,531 


General and Administration 


22,531 


Generator 


13,974 


One-year warranty (in addition to standard warranty of one year) 


12,000 


Control System 


8,550 


Bases (Concrete Pad) 


1,262 


Construction Contingency (3 Percent of Total Contract Costs) 


95,468 


Subtotal 


S2,776,190 


Net Profit (14.6 percent) 


405,552 


Total Contract Cost 


$3,181,742 



Description: 



^Miscellaneous Expenses in the above budget include 
testing, travel, special tools, manuals, and shipping costs. 

The subject resolution would authorize a Design-Build 
Contract to design and build a Cogeneration Facility at the 
Southeast Water Pollution Control Plant in a maximum 
amount of $3,181,743 between the PUC and the Sierra 
Diesel Detroit Allison (SDDA), a subsidiary of Stewart & 
Stevenson, Inc. The proposed Cogeneration Facility would 
allow the PUC to capture gas emitted during the sewage 
treatment process at the Southeast Water Pollution Control 
Plant and reuse that gas to generate its own electricity, 
therefore reducing the amount of electricity that Hetch 
Hetchy would be required to supply the Southeast Water 
Pollution Control Plant from other sources in order to 
operate. In addition, Ms. Park of the PUC advises that 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



13 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 



reusing these digester gases would reduce odors currently 
created by the Plant in the Bayview/Hunter's Point 
neighborhood. (See Attachment I, provided by the PUC, for 
additional details on the proposed Cogeneration Facility). 
Ms. Park advises that the PUC will receive a total 
estimated $1.15 million subsidy (approximately $230,000 
annually) to help fund development costs of the proposed 
Cogeneration Facility from the California Energy 
Commission (CEC) during the first five years of the 
Cogeneration Facility operation, as discussed in Comment 
No. 8 below. 

According to the PUC, the PUC issued a Request for 
Qualifications (RFQ) to 10 firms and received responses 
from two firms. Subsequently, the PUC issued a Request 
for Proposal (RFP) in February of 1999 to design and 
construct the subject Cogeneration Facility and received 
two proposals, one from SDDA and the other from Biller- 
McCoy Builders, Inc., as stated in Attachment I, provided 
by the PUC (see Comment No. 7 below). According to Ms. 
Park, the PUC considered SDDA's to be the only responsive 
bidder, since Biller-McCoy Builders had not participated in 
the required Request for Qualifications process, as 
explained in Attachment I. In any event, SDDA submitted 
the lowest bid of $3,094,804, l which was $3,533,808 less 
than the cost proposal of $6,628,612 submitted by Biller- 
McCoy Builders, Inc. (see Comment No. 7 below). According 
to Ms. Park, SDDA's bid was $3,533,808 less than the bid 
submitted by Biller-McCoy Builders largely due to the type 
of Cogeneration Facility SDDA proposed to build, which is a 
more conventional approach to this kind of project. In 
September of 1999, in addition to the fact that the PUC 
considered SDDA to be the only responsive bidder, the PUC 
adopted a resolution approving the selection of SDDA, 
based on the criteria discussed in Attachment I, and 
authorizing the PUC to negotiate a contract with SDDA. 

According to Ms. Park, the RFP had requested that firms 
submit cost proposals based on a variety of purchase 



1 According to Ms. Park, SDDA's original bid of 83,094,804 increased by $86,939 to the total of 
the subject Design-Build Contract of S3. 181,743 because of additional requests made by the 
PUC during its contract negotiation with SDDA. including additional digester gas storage and 
an additional radiator. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 

options, including the City purchasing outright the 
Cogeneration Facility upon its completion, as well as the 
firm owning the Cogeneration Facility and selling the 
electricity generated to the City. Ms. Park advises that 
PUC staff, after selecting SDDA for the project, determined 
that it would be more cost effective for the City to purchase 
the Cogeneration Facility outright, as stated in Attachment 

1. According to Ms. Park, the PUC then decided to negotiate 
with SDDA for a separate Operation and Maintenance 
Contract in the amount of $1,157,540, in addition to the 
subject Design-Build Contract (see Comment No. 2 below). 
According to Ms. Park, at its PUC meeting of September 12, 
2000, the PUC approved the subject Design-Build Contract 
but voted to continue the proposed separate Operation and 
Maintenance Contract pending further negotiations and 
analysis of the contract's potential costs and benefits to the 
City. 

Comments: 1. According to Ms. Park, construction on the proposed 

Cogeneration Facility is expected to begin in December of 
2000 and be completed by December 31, 2001. According to 
Ms. Park, the scheduled time for this contract is 305 
calendar days to substantial completion and sixty 
consecutive calendar days to final completion, for a total of 
365 days, or one year. Ms. Park advises that the PUC 
previously planned to complete the proposed Cogeneration 
Facility by December of 2000. However, an extended 
negotiation process between the PUC and SDDA has 
postponed the completion date for one year until December 
of 2001, according to Ms. Park. 

2. According to Ms. Park, the amount of the Operation and 
Maintenance Contract would be a total of $1,157,540 over 
the five years of the contract ($231,508 per year), 
commencing upon completion of the Cogeneration Plant, 
approximately in January of 2002 and terminating in 
January of 2007. However, as stated previously, the PUC 
has not yet approved the proposed Operation and 
Maintenance Contract. Ms. Park advises that PUC staff 
pursued the Operation and Maintenance Contract with 
SDDA in order to guarantee the full California Energy 
Commission (CEC) subsidy by holding the contractor 
responsible for meeting CEC requirements for electricity 
generation during the first five years of operating the 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

15 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 



Cogeneration Facility. Under the proposed Maintenance 
and Operation contract, SDDA would be required to 
compensate the PUC for any lost CEC subsidy funds 
resulting from sub-optimal performance of the 
Cogeneration Facility during the first five years of 
operation, according to Ms. Park. 

Ms. Park advises that the PUC decided to negotiate the 
Operation and Maintenance Contract on a sole-source basis 
with SDDA and has not undergone a competitive bidding 
process for the Operation and Maintenance Contract for the 
Cogeneration Facility, because "it is unlikely that another 
contractor would be willing to guarantee the performance of 
a plant designed and constructed by someone else," as 
stated in Attachment I. Ms. Park advises that the PUC, in 
the process of negotiating a $1,157,540 contract amount 
($231,508 per year) with SDDA, confirmed that the contract 
amount would be roughly equal to what it would cost the 
PUC to operate and maintain the facility itself. 

3. According to Ms. Sheryl Bregman of the City Attorney's 
Office, the Operation and Maintenance Contract is not 
subject to approval of the Board of Supervisors since the 
proposed five-year contract for $1,157,540 does not meet 
provisions in the Charter, Section 9.118, requiring Board of 
Supervisors approval of contracts over $10 million and/or 
with terms of 10 years or more. 

4. Attachment I, provided by the PUC, explains that the 
PUC issued a single RFP for the design and construction of 
the proposed Cogeneration Facility, as opposed to using 
PUC employees and resources, and as opposed to issuing an 
RFP for the design portion of the project and undergoing a 
separate competitive bidding process for the construction of 
the Cogeneration Facility, because of the specialized nature 
of designing and building the Cogeneration Facility and due 
to the need to complete the project as quickly as possible in 
order to qualify for the full amount of an estimated $1.15 
million subsidy from the California Energy Commission 
(CEC), as discussed in Comment No. 8 below. 

5. As stated previously, under the proposed Operation and 
Maintenance Contract with SDDA, which is not the subject 
of this resolution, the PUC would pay to SDDA $231,508 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

"16 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 



annually for the five years of the contract, for a total of 
$1,157,540. After the five-year Operation and Maintenance 
Contract with SDDA expires, approximately in January of 
2007, the PUC will operate and maintain the Cogeneration 
Facility using Civil Service employees, according to Ms. 
Park. Ms. Park advises that operation and maintenance 
costs to the City for the 15 years after the initial five-year 
contract with SDDA would begin on an annual basis at an 
estimated $261,604 for the year 2007, and gradually 
increase annually with the age of the Cogeneration Facility 
to account for inflation, major overhauls and an increasing 
need for maintenance the longer the facility is operating, as 
shown in Attachment II, provided by the PUC. Therefore, 
total operation and maintenance costs for the first 20 years 
of operating the proposed Cogeneration Facility would be 
an estimated $6,785,110 (a total of $1,157,540 for the 
Operation and Maintenance Contract with SDDA for the 
first five years of the contract, a total of $4,865,551 in costs 
to the City for the following 15 years of operating the 
facility and a total of $762,019 for major overhauls over 
those 15 years). The PUC did not provide maintenance and 
operation cost estimates for the City beyond the first 20 
years of operation of the Cogeneration Facility. 

According to Ms. Park, the PUC completed an analysis 
finding that the costs to the PUC of maintaining and 
operating the Cogeneration Plant using City employees 
would be roughly equal to the cost of a Operation and 
Maintenance Contract with SDDA, as stated in Attachment 
I. However, the PUC still decided to pursue the Operation 
and Maintenance Contract with SDDA for the first five 
years, rather than maintain and operate the facility itself, 
because the goal in having the Cogeneration Facility 
maintained and operated by the same company that built it 
was to guarantee the full CEC subsidy by holding the 
contractor responsible for meeting CEC requirements for 
electricity generation during the first five years of operating 
the Cogeneration Facility, as stated in Attachment I. 

6. According to Ms. Park, the PUC requested that HMH 
Resources, a private consulting firm, conduct an economic 
and risk analysis of the proposed Cogeneration Facility, as 
part of HMH Resources' multi-year contract with the PUC. 
According to the cost-benefit analysis completed by HMH 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

17 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 



Resources in September of 1999, summarized in 
Attachment III, the proposed Design-Build Contract and 
Operation and Maintenance Contract with SDDA would 
generate a total net savings to the City of an estimated 
$16,740,528 over the first 20 years of operating the 
Cogeneration Facility (which could continue to operate 
beyond the first 20 years) due primarily to: (a) the reduced 
cost of electricity to Hetch Hetchy since the Cogeneration 
Facility would produce its own electricity, and (b) the 
California Energy Commission (CEC) subsidy. However, 
the Budget Analyst notes that the operation and 
maintenance costs included in the cost-benefit analysis 
total $4,630,160 over the first 20 years of operation, 
remaining constant every year at $231,508 and not 
accounting for the annual cost increases for inflation and 
related costs discussed in Comment No. 5 above and shown 
in Attachment II, provided by the PUC. Using instead the 
total estimate of $6,785,110 for operation and maintenance, 
which does account for increasing costs over 20 years, 
would reduce the total estimated savings to the City over 
20-years by $2,154,950 ($6,785,110 less $4,630,160) from 
$16,740,528 to $14,585,578. According to the PUC, 
additional benefits to the City of the proposed Cogeneration 
Plant would be the use of a renewable resource by the PUC 
that would otherwise be wasted and a reduction of odorous 
gases emitted from the Southeast Water Pollution Control 
Plant. The cost-benefit analysis prepared by HMH 
Resources and summarized in Attachment III assumes that 
the Cogeneration Facility would be completed and 
operating by January of 2001. However, the estimated 
opening date for the facility is now January of 2002. 

7. As stated previously, the PUC received two proposals in 
response to the RFP to design and build the proposed 
Cogeneration Facility. According to Ms. Park, the two firms 
provided the following cost proposals in their applications: 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 



Firm Design-Build 

Cost Proposal 


BiHer-McCoy 
Builders, Inc. 


$6,628,612 


SDDA 


$3,094,803 







According to Ms. Park, SDDA's original bid of $3,094,804 
increased by $86,939 to the total of the subject Design- 
Build Contract of $3,181,743 because of additional requests 
made by the PUC during its contract negotiation with 
SDDA, including additional digester gas storage and an 
additional radiator. As previously stated, SDDA was 
considered to be the only responsive bidder. In addition to 
the cost of the SDDA proposal, the PUC considered in its 
selection the design submitted by SDDA and the experience 
of SDDA in building and operating such facilities, as stated 
in Attachment I. 

8. According to Ms. Park, and as stated in the subject 
resolution, the State California Energy Commission (CEC) 
has awarded to the PUC a subsidy of $0,139 per kilowatt- 
hour of electricity produced by the proposed Cogeneration 
Facility during its first five years of operation. According to 
Ms. Park, this subsidy will provide a total estimated $1.15 
million to the PUC during the first five years the 
Cogeneration Facility is operating (approximately $230,000 
annually). According to Ms. Park, in order for the PUC to 
receive the full amount of the estimated $1.15 State CEC 
subsidy, the proposed Cogeneration Facility must be 
completed by December 31, 2001 and, once operating, must 
meet certain requirements for electricity generation. 

9. As stated previously, the proposed resolution would 
approve a contract between the City and Sierra Diesel 
Detroit Allison (SDDA) to design and build a Cogeneration 
Facility at the Southeast Water Pollution Control Plant. 
However the subject resolution does not specify the 
maximum contract amount of $3,181,743. Therefore, the 
subject resolution should be amended to include the exact 
contract amount of not to exceed $3,181,743. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

1Q 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 



10. The proposed contract states that the PUC would be 
authorized to adjust the total contract amount of 
$3,181,743 downward during performance or upon 
completion of the design and construction work if SDDA 
failed to meet the performance and contract term 
requirements. The contract documents provide the 
following standards for assessing liquidated damages 
SDDA would be required to pay to the PUC: 

• $3,100 per calendar date for failure to meet substantial 
completion after 305 days. 

• $750 per calendar day for failure to meet final 
completion after 365 days. 

• $7,700 per kilowatt for electric output below 1954 
kilowatts. 

• $9000 per 10 British Thermal Units (BTU) per kilowatt 
hour for fuel consumption above the amount specified in 
the contract. 

• $5000 per 10,000 BTU for thermal output below amount 
specified in contract. 

Ms. Park advises that the liquidated damages above are 
designed to compensate the PUC for any CEC subsidy 
funds lost due to the Cogeneration Facility not being 
completed by the December 31, 2001 deadline, as stated in 
Attachment I. The City will make its first payment of 90 
percent of the total contract cost to SDDA after the City has 
verified that SDDA has reached substantial completion of 
the Cogeneration Facility and that the City has verified 
that the facility is operating according to the terms outlined 
in the contract. In the subject Design-Build Contract, 
"substantial completion" is defined as 30 days of continuous 
operation of the Cogeneration Facility, during which time 
the facility must meet the performance standards outlined 
in the contract. The City will pay the remaining 10 percent 
of contract costs to SDDA after the City has verified that 
the SDDA has reached final completion of the project. 

11. According to Mr. Carlos Jacobo of the PUC, the 
proposed $3,181,743 in contract funds are included in 
Hetch Hetchys Renewable Energy Generation Project 
Budget No. CUH943. which were appropriated in Hetch 
Hetchy's FY 2000-2001 budget. Mr. Jacobo reports that this 
project budget currently has a balance of $3,200,000. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

20 



Memo to Finance and Labor Committee 

October 18, 2000 Finance and Labor Committee Meeting 



Recommendations: 



Supervisor Yee 
Supervisor Bierman 
President Ammiano 
Clerk of the Board 
Controller 
Steve Kawa 



According to Ms. Park, the remaining $18,257 ($3,200,000 
less the contract amount of $3,181,743) will be used to fund 
PUC staff time in coordinating work with the developer on 
the premises of the Southeast Water Control Pollution 
Plant. 

12. According to the subject Design-Build Contract, SDDA 
is required to comply with Human Right Commission 
Subcontracting goals for the proposed Design-Build 
Contract, which are 20 percent combined MBE/WBE for the 
design services and 30 percent combined MBE/WBE for the 
construction services. 

1. Amend the proposed resolution to state the contract 
amount cannot exceed $3,181,743 between the PUC and 
SDDA, in accordance with Comment No. 9 above. 

2. Approval of the proposed resolution, as amended, is a 
policy matter for the Board of Supervisors. 



// 



iy/ 



Harvey M. Rose 



BOARD OF SUPERVISORS 
BUDGET ANALYST 



91 



OCT-12-2000 18:30 



SFPUC 




Attachment 
Page 1 of 5" 



Water 

hetch Hetchy 
water & power 

CLEAN WATER 



WILUR U BROWN, JR. 

MAYOR 

E- Dennis NOhMaNDY 

president 
Victor 6- makras 

Vice PRESIDENT 

frank u. Cook 
Ann moluer Cakn 
ashok kumar bh att 

john p. mou-ane, jr. 

General Manager 



San Francisco Public utilities Commission 

1 1 SS Market St.. 4th Floor. San Francisco. Ca 94 1 03 • Tel. (4 1 5) 554-0725 • Fax (4 i s 554-0798 



MEMORANDUM 

Harvey Rose, Board of Supervisors' Budget Analyst 
Laurie Park, Hetch Hetchy - Acting General Manager 
Southeast Cogeneration Project 
October 12,2000 





TO: 
FROM: 
SUBJECT: 
DATE: 

BACKGROUND 



Through the sewage treatment process, the Southeast Water Polludon Control Plant 
(SEWPCP) produces an average of 1,100,000 standard cubic feet (scf) of digester gas 
per day. Digester gas consists mosdy of methane and carbon dioxide. It is often used 
as a fuel to produce thermal and/or electric energy. Digester gas is considered a 
renewable resource. 

Currently, 40% of the digester gas produced by the SEWPCP is recycled to the boiler 
system to produce heat for the digesters and hot water supply for buildings. The 
excess 60% is flared to the atmosphere. 

This project would utilize the digester gas to fuel a two megawatt cogeneration plant. 
The plant will use approximately 78% of the digester gas to produce both heat and 
electricity. The remaining digester gas will continue to be used to heat the existing 
boilers, but will be supplemented by the thermal energy produced by the cogeneration 
plant. The electricity will be sold by HH to the SEWPCP for its use on-site. By 
eliminating operation of the waste gas flares, odors from the SEWTCP will be 
reduced. In addition, this Project will provide 2 MW of emergency generation 
capacity in event of an outage on the PG&E electric grid . 

BIDDING PROCESS 

The City obtained a subsidy from the California Energy Commission (CEC) towards 
the construction of this renewable project. The subsidy is payable on the first 5 years' 
output generated by the plant at a rate of S0.0139 per kilowatt-hour (kWhr). Based 
on total estimated generation of 82,605,000 kWhrs over this period, the value of the 
subsidy is approximately Sl.l million. In order to earn the full CEC subsidy to which 
this project is entitled, the cogeneration facility must be operational bv January 1 
2002. 



sms 



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22 



OCT-12-2000 18:31 SFPUC 

Attachment I 
Page 2 of 4 

Members of the Southeast community indicated a desire to allow bidders of cutting edge 
technologies with superior environmental performance (such as fuel cells which produce 
virtually no emissions) to participate in the bidding process. The bids were expected to range 
from $5 million for conventional technologies with a 15-20 year life to as high as S50 million for 
a prototype 2 megawatt fuel cell with a 2-3 year life that one fuel cell developer was promoting. 

SFPUC staff decided to approach the bid process on the basis of bid price per kilowatt hour 
generated by the proposed Project. By this means, there would be a reasonable basis for 
comparing proposals from developers of projects employing vastly different technologies with 
very different operating characteristics, costs and efficiencies. A two step bidding process was 
employed: a "Request for Qualifications" ("RFQ") was first issued, followed by a "Request for 
Proposals" ("RFP") from bidders deemed qualified. 

The original project structure contemplated allowing a contractor to construct a Project which 
beneficially employed the digester gas from the SEWPCP and sell the output to HH. A 
condition of the RFQ was that the cost of the output of the proposed Project could not exceed the 
price that SEWPCP paid for electricity, approximately $0,075 per kilowatt hour (kWhr). A 
further condition was that the developer should be capable of assuming responsibility for the 
complete design, construction, operation and maintenance of its proposed Project. In this 
manner, bidders with prototype technologies such as the fuel cell developer had the opportunity 
to compete with developers employing conventional technologies. Costs in excess of the 
$0.075/kWhr would have to be sought from other sources, such as federal and state renewable 
resource development grants and subsidies and private investors. 

The RFP required that bidders indicate the price at which output would be sold to the SFPUC in 
cents per kilowatt hour in each of Years #1-12 of the proposed project's operation. In addition, 
the bidders were required to provide estimated installed costs, including major system 
components, all interties, design and construction of the building, interest during construction, 
transaction costs and contingencies. Further, the bidders were required to provide buyout prices 
for Years #5-12 in the event that the SFPUC elected a lease-purchase arrangement. 

In December 1998, the SFPUC issued an RFQ. Although a number of firms attended the 
bidders' conference and expressed interest, only two firms submitted qualifications statements: 
Sierra Detroit Diesel Allison ("SDDA"), a subsidiary of Stewart & Stevenson with substantial 
experience in constructing and operating similar cogeneration plants throughout the U.S., and a 
joint venture of CH2M Hill and Energy 2000. Both of these firms were proposing conventional, 
well established technologies. Both were deemed qualified to submit proposals. 

In January 1999, the RFP was issued to the two qualified bidders. However, the joint venture of 
CH2M Hill and Energy 2000 decided not to submit a proposal. Instead, they passed the RFP on 
to Biller-McCoy Builders, Inc. who submitted a proposal on its own behalf. The proposal was 
for 3 x 750 kW (gross capacity 2.2 MW) gas turbines for an installed price of $6.6 million. The 
Biller-McCoy Builders proposal was rejected on the basis that they had not participated in the 
RFQ process and was therefore ineligible to bid. Therefore, SDDA was the sole responsive 
bidder. 



23 



OCT-12-2000 18:31 SFPUC Attachment I 

Page 3 of 4 

In September 1999, the SFPUC authorized staff to negotiate a contract with SDDA. However, 
the SFPUC decided that it would be more cost effective purchase the Project outright, rather than 
purchase output from the Project. 

Staff negotiated two contracts with SDDA: a design-build contract in which the City would 
purchase the Project upon completion of construction, and an operations and maintenance 
agreement under which SDDA would provide services for up to five years, coincident with the 
term of the CEC subsidy, and SDDA would agree to guarantee performance of the Project 
sufficient to earn the full CEC subsidy during the period in which it operated and maintained the 
Project. 

In September 2000, the SFPUC approved award of Contract CS-520 to SDDA to design and 
build a two-megawatt cogeneration facility at SEWPCP for a contract price of $3, 1 8 1 ,742. The 
SFPUC decided that inasmuch as the operations and maintenance agreement was optional, the 
SFPUC would defer approval until policy issues had been fully vetted with respect to staffs 
proposed use of a contractor to operate and maintain a facility owned by the SFPUC. 

DESIGN-BUILD CONTRACT 

Ninety percent (90%) of the design-build contract price is payable after the Facility has been in 
operation for 30 days, and ten percent (10%) is payable upon completion of all punch list items. 
The contract provides for liquidated damages in case the contractor fails to meet any of the 
minimum performance specifications. In addition, failure to complete the project by January 1, 
2002 will trigger liquidated damages at the rate of S3, 100 per calendar day for failure to meet 
"substantia) completion" and S750 per calendar day for failure to meet "final completion". The 
value of the negotiated liquidated damages is equivalent to the value of the output "lost" during 
the period of non-performance; i.e., at approximately $0.075/kWhr. 

Funding is available in Project CUH943 in the amount of S3. 2 million. The amount greater than 
the purchase price (approximately S28.000) is sufficient to cover SFPUC staff time to coordinate 
work, with the developer on SEWPCP's premises. Inasmuch as this is a design-build contract, 
minimal project oversight will be necessary. 

OPERATIONS AND MAINTENANCE CONTRACT 

In negotiating the operations and maintenance contract, SFPUC staff determined that City costs 
to do the same work would be roughly equivalent to the price quoted by SDDA. The principal 
benefit in allowing SDDA to do the work for the first 5 years would be its guarantee of the full 
CEC subsidy. In addition, SDDA included training of SFPUC staff in both operations and 
maintenance in its scope of work. 

Staff did not conduct a separate bidding process for an operations and maintenance contractor for 
this Project since it is unlikely that another contractor would be willing guarantee the 
performance of a plant designed and constructed by someone else. 



?A 



OCT-12-2000 18=32 SFPUC 

Attachment . 

Page 4 of 4 

CEC SUBSIDY 

The CEC subsidy is earned on the quantity of output generated during the first 5 years of the 
Project's operation. However, the last date for collection of the CEC subidy is December 31, 
2006. In the event that the Project is not placed in-service by January 1, 2002, the Project will 
lose the CEC subsidy at a rate of approximately 5230,000 per year ($630 per day). 

As noted under the description of the design-build contract, the negotiated liquidated damages 
make the City "whole" for the full value of any CEC subsidy lost. 

PROJECT ECONOMICS 

The SEWPCP is presently charged an average rate of approximately S0.075 per kWhr. The 
value of the annual electric output of this plant at the $0075/kWhr rate is $1.2 million. 

Annual operating costs are estimated at $265,000. Fuel is typically the most significant 
component of cost for a cogenerauon plant. However, since digester gas is produced as a 
byproduct of the sewage digestion process, the cost of fuel for this project is 50. 

The proposed project therefore yields a positive economic benefit of $935,000 per year before 
consideration of the CEC subsidy. After accounting for the CEC subsidy (approximately 
$230,000 per year for the first 5 years), the payback on this project is less than 3 years. [$3.2M ■+■ 
(S935K+$230K) = 2.75 years] 

REQUEST FOR APPROVAL 

SFPUC requests approval from the Board of Supervisors for the award of the Design Build 
Agreement to SDDA in the amount of S3, 18 1,742. 

Please contact David Henzl (415-554-3435) if there are any further questions. 

Cc: 

BOS Budget Analyst - Emilie Neumann 

CWP - Jon Loiacono 

CWP - Joe Wong 

HHWP - David Henzl 

SFPUC Finance - Carlos Jacobo 

Records 



TOTAL P. 05 



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^%, City and County of San Francis [AII committees] 

|S§§M*\ Meeting Minutes Government Document Section 

iS^S' Finance and Labor Committe Mam Ubrar V 

fTTjijX Members: Supervisors Leland Yee, Sue Merman, Toi 

Clerk: Mary Red 

Wednesday, pctober 25, 2000 10:00 AM City Hall, Room 263 

Regular Meeting 

Members Present: Leland Y. Yee, Tom Ammiano. 
Members Absent: Sue Bierman. 



Meeting Convened 

The meeting convened at 10:07 a.m. 

001810 [Government funding for rent subsidies to non-profit arts organizations that are in immediate danger of 
being evicted or displaced by rent increases] 
Supervisors Ammiano, Bierman, Leno 

Ordinance appropriating $1,500,000 from the General Fund Reserve to provide rent subsidies to non-profit art 
organizations that are in immediate danger of being evicted or displaced by rent increases, through the Art 
Commission for fiscal year 2000-2001. 

(Companion measure to File 00181 1.) 

10/16/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Supervisor Ammiano; Ted Lakey, Deputy City 
Attorney; June Gutfleisch, Supervisor Bierman's Aide; Pam David, Director, Mayor's Office of Community 
Development; Alma Robinson, California Lawyers for the Arts; Sally, Program Director, Art House; Augusta 
Moore, Dance Mission; Lena Gatchalian, Dance Brigade; Rachel Kaplan; Jack Davis; Jo Kriter; Jose 
Navariete; Dance Mission; Debra Walker; Tina Barchero; Joe Williams, Isadora Duncan Dance Awards 
Committee; Ann Bluethenthal, ABD Productions; Sarmir Bitar, Rescue Culture Collective; Andrew Woods; 
Charlie Hodge; Krissy Keefer; Carolina Ponce de Leon, Galeria de La Raza; Janeen Antoine, American 
Indian Contemporary Arts; Chris Lanier, Eviction Defense Coalition; Andy Patrick, Fifty Crows; Jonathan 
Youtt; Jeannere Przyblyski; Prince Gomolvilas, Theatre Bay Area; John Warren, Magic Theatre; Briana 
Green, SUBUD; Rowland Weinstein; Joan Hogan; Peter Rothblatt, Rhythm and Motion; John Ehelich. 
RECOMMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



DOCUMENTS DEPT 
OCT 3 2c:j 

SAN FRANCISCO 
PUBLIC LIBRARY 



City and County of San Francisco 1 Printed at 3:15 PM on 1MV00 



Finance and Labor Committee 



Meeting Minutes 



October 2S, 2000 



00181 1 [Providing rent subsidies to nonprofit arts organizations] 
Supervisors Ammiano, Bierman, Leno 

Ordinance establishing terms and conditions for the expenditure of an appropriation of 1 .5 million dollars from 
the general fund to provide a grant to California Lawyers for the Arts to give rent subsidies to nonprofit arts 
organizations that are in immediate danger of being evicted or displaced by rent increases. 
10/16/00, RECEIVED AND ASSIGNED to Finance and Labor Committee 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Supervisor Ammiano, Ted Lakey, Deputy City 
Attorney; June Gutfleisch, Supervisor Bierman's Aide, Pam David, Director, Mayor's Office of Community 
Development; Alma Robinson, California Lawyers for the Arts; Sally, Program Director, Art House; Augusta 
Moore, Dance Mission; Lena Gatchalian, Dance Brigade, Rachel Kaplan; Jack Davis; Jo Kriter; Jose 
Navariete; Dance Mission; Debra Walker; Tina Barchero; Joe Williams, Isadora Duncan Dance Awards 
Committee; Ann Bluethenthal, ABD Productions .Sarmir Bitar, Rescue Culture Collective, Andrew Woods. 
Charlie Hodge; Krissy Keefer; Carolina Ponce de Leon, Galeria de La Raza; Janeen Antoine. American 
Indian Contemporary Arts; Chris Lanier, Eviction Defense Coalition; Andy Patrick, Fifty Crows, Jonathan 
Youtt; Jeannere Przyblyski; Prince Gomolvilas, Theatre Bay Area; John Warren, Magic Theatre, Briana 
Green, SUBUD; Rowland Weinstein; Joan Hogan; Peter Rothblatt, Rhythm and Motion; John Ehelich. 
AMENDED, AN AMENDMENT OF THE WHOLE BEARING SAME TITLE. 
RECOMMENDED AS AMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



001699 [Airport sublease of warehouse space to the S.F. Fine Arts Museums| 
Supervisor Newsom 

Resolution approving a sublease of warehouse space between the Corporation of the San Francisco Fine Arts 

Museums and the City and County of San Francisco, acting by and through its Airport Commission. (Airport 

Commission) 

9/27/00, RECEIVED AND ASSIGNED to Finance and Labor Committee 

10/1 1/00. CONTINUED. Continued to October 25, 2000. 

Heard in Committee. Speakers: Harvey Rose. Budget Analyst, Supervisor Yee, Peter Nardoza. Airport; 
Anthony DeLucchi, Real Estate Department. 
RECOMMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



001723 [Government Funding, 529,605,000, Educational Facility Bond Proceeds| 
Mayor 

Ordinance appropriating $29,605,000 of Educational Facility Bond proceeds for general renovation of City 
College structures, adding health and safety features that bring structures into ADA compliance, and 
telecommunications facilities, for fiscal year 2000-2001 . 

(Fiscal impact.) 

10/2/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Dr. Philip Day. Chancellor, S F. City 
College; Supervisor Yee. 
RECOMMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



City and County of San Francisco 



Primed at 3:15 P\f on 10 7d'00 



Finance and Labor Committee 



Meeting Minutes 



October 25, 2000 



001789 (PUC Commercial Paper Issuance] 

Resolution approving the expansion of the Public Utilities Commission Commercial Paper Program by 
increasing the aggregate principal amount which may be outstanding at any one time of San Francisco Public 
Utilities Commission Commercial Paper Notes (Water Series) from $150,000,000 to $250,000,000 pursuant to 
Article V of Chapter 43 of Part I of the San Francisco Municipal Code for the purpose of financing and 
refinancing certain capital improvements related to the water enterprise; approving the maximum interest rate 
thereon; and related matters. (Public Utilities Commission) 
10/1 1/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

Heard in Committee. Speakers: Harvey Rose, Budget Analyst; Bill Berry, Public Utilities Commission. 
RECOMMENDED by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



001507 [Closure of Portions of Fort Funston] 
Supervisor Yee 

Hearing to consider the National Park Services closure of open space at Fort Funston which has resulted in a 
reduction in land available for dog walking and other recreational use by residents. 
8/21/00, RECEIVED AND ASSIGNED to Finance and Labor Committee. 

9/20/00, CONTINUED TO CALL OF THE CHAIR. Heard in Committee. Speakers: Supervisor Yee; Lydia Boesch, Attorney; Nathan 
Winograd, SPCA; Linda Shore, Physicist; Nancy Barber; Linda McKay, Fort Funston Dog Walkers Association, Grayce Regan, 
Independent Living Resource Center; Florence Sarrett; Eleanor Vinsant; Alan Grant; Alberta Romamni; Christy Cameron; Laura 
Cavaluzzo; Larry Shockey, Attorney; Linda Homing; Roulhac Gam; Lynn Walker; Steven Krefting, National Parks Conservation Assoc; 
Supervisor Bierman; Supervisor Ammiano; Jennifer Finlay; Anne Farrow, SFDOG; Patricia LaCava; Lindsay Kefauver; Vicki Tiernan; 
George Durgenan, Park Ranger, Laura Sweet, Lisa Vatorie; Shelia Mahoney, Ann Alden; Robin Buckley; John Keeting; Enc Finseth, 
Attorney. 

Heard in Committee. Speakers: Supervisor Yee; Mariam Morley, City Attorney; Nathan Winograd; Rouleau 

Gain; John Keeling; Supervisor Ammiano. 

CONTINUED TO CALL OF THE CHAIR by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



City and County of San Francisco 



Printed at 3:15 PM on IdWOO 



Finance and Labor Committee 



Meeting Minutes 



October 25, 2000 



001324 [Bayview Hunters Point Foundation! 
Supervisor Ammiano 

Hearing to inquire into: (1) the fiscal condition and budget of the Bayview Hunters Point Foundation, (2) the 
status of the contract negotiations between the City, the BHPF, and SEIU Local 790; (3) the status of the 
technical assistance funded by the City and other issues pertaining to contract negotiations. 
7/17/00, RECEIVED AND ASSIGNED lo Finance and Labor Committee 
10/18/00, CONTINUED. Continued to October 25, 2000. 

Heard in Committee. Speakers: Supervisor Ammiano; Karen Patterson-Mathew, Executive Director, Bayview 
Hunters Point Foundation; Barbara Garcia, Director, Population Health, Department of Public Health. 
Supervisor Yee; Candy Gloria, Director Tenderloin Clinic; Minnie Ward, Nurse; Lawanda Preston, Local 
790; Diane Soarate, Children's Program; Marie Harrison; Sophie Maxwell; Paul Boden, Coalition on 
Homelessness; lyabo Abeke Oladigbolu, Bayview Club House; Roy Harrison; Chris Fisher; Dr. Thomas Ryan, 
Medical Director, Tenderloin Clinic; Dr. Richard Juhl, Psychiatrists, Tenderloin Clinic; Donna Wolfe, 
Tenderloin Clinic; Geneva Pierre Williams; Chris Miller, Pattie Tamura; Marshall Walker; Cecilia Valentine. 
Chris Daley, Mission Agenda; Linda Zereske, Local 790; Dr Ramona Davis, BVHP Menial Health Clinic, 
Dodie Chaney-Fernandes; Gene Hartman, Jr.; Cassandra Jackson; Shirley Jones, Board of Directors, BHPF; 
Robert Surber; Charles Harris; Karen Goodson Pierce, Bayview Democratic Club, Daisy, Sex Workers 
Organized for Labor, Human and Civil Rights; Denise D'Anne; Norman Tanner; Paul Henderickson, Bayview 
Club House; JR Manuel; Cati A Okorie; Leslie Drummer; Christie Herrera; Helynna Brooke, Mental Health 
Board; Matt Rostoker; Demone Hale. 
CONTINUED TO CALL OF THE CHAIR by the following vote: 

Ayes: 2 - Yee, Ammiano 

Absent: 1 - Bierman 



ADJOURNMENT 

The meeting adjourned at 2:00 p m. 



City and County of San Francisco 



Printed at 3:15 PM on IblVOO 



[Budget Analyst Report] 

Susan Horn 

Main Library-Govt. Doc. Section 



>.<£?</ 



\e/oo 




of san francisco DOC U M E NTS D E PT 

. BOARD OF SUPERVISORS 

SAN FRANCISCO 

BUDGET ANALYST PUBLIC LIBRARY 

1390 Market Street, Suite 1025, San Francisco, CA 94102 (415) 554-7642 
FAX (415) 252-0461 

October 19, 2000 

TO: -^Finance and Labor Committee 

FROM: ^Budget Analyst 

SUBJECT: pctober 25, 2000 Finance and Labor Committee Meeting 

Items 1 and 2 - Files 00-1810 and 00-1811 



Department: 
Items: 



Amount: 
Source of Funds: 
Budget: 



Arts Commission 

Supplemental appropriation ordinance of $1,500,000 
from the General Fund Reserve, for the Arts 
Commission, to provide emergency rent subsidies to 
nonprofit arts organizations that are in immediate 
danger of being evicted or displaced as a result of rent 
increases (File 00-1810). 

Ordinance establishing the terms and conditions for 
the expenditure of an appropriation of $1.5 million 
from the General Fund Reserve to provide a grant to 
California Lawyers for the Arts, a nonprofit agency, to 
give rent subsidies to nonprofit arts organizations that 
are in immediate danger of being evicted or displaced 
by rent increases (File 00-1811). 

$1,500,000 

General Fund Reserve 

The Attachment, provided by the California Lawyers 
for the Arts, identifies an administrative budget of 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 

$56,565 to administer the proposed program for the 
period from approximately November 1, 2000 through 
June 30, 2001. Ms. Alma Robinson of the California 
Lawyers for the Arts advises that an additional 
approximately $2,000 would be needed to compensate 
the selection panelists, assuming there would be 
approximately 20 meetings and compensation of $100 
for the one arts representative per meeting. This total 
of $58,565 of administrative expenses represents 
approximately 3.9 percent of the total supplemental 
appropriation of $1,500,000. The $1,441,435 balance of 
the funds would be used to award direct grants for 
rent subsidies to individual nonprofit arts 
organizations (See Comment 8). 

Description: The proposed supplemental appropriation ordinance of 

$1,500,000 (File 00-1810) and the companion 
ordinance (File 00-1811), which specifies the terms 
and conditions for the award of the $1,500,000 of 
funds, are together intended to provide emergency 
financing for rent assistance for nonprofit arts 
organizations that are facing immediate eviction or 
displacement due to significantly increased rents in 
San Francisco. As stated in the proposed legislation 
(File 00-1811), these emergency funds would 
immediately help to stabilize arts organizations 
currently leasing space in San Francisco, while the 
City pursues medium and long-range goals of (1) 
maximizing, expanding and improving existing arts 
spaces and (2) identifying, securing and improving 
new arts spaces. Under the proposed legislation, the 
California Lawyers for the Arts, a nonprofit 
organization which provides legal services and 
information for underserved artists and art 
organizations in California, would be awarded the 
subject $1,500,000 grant from the Arts Commission, to 
administer a program to distribute these funds to 
specifically eligible arts organizations (see Comment 1 
explaining how the California Lawyers for the Arts 
was selected). 

Under the proposed ordinance (File 00-1811), in order 
to be eligible to receive funding, the nonprofit arts 
organizations would need to meet the following nine 
specific criteria: (1) Federal tax law 501(c)(3) nonprofit 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

2 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



status or fiscal sponsorship; (2) the organization's 
primary purpose must be either visual arts, dance, 
theater, music, literary arts or new genre/multimedia; 
(3) annual operating budget of no more than $1.2 
million; (4) demonstrated financial accountability; (5) 
demonstrated financial stability; (6) substantial 
continuing activities in and support from the 
community; (7) existence in San Francisco for at least 
two years prior to the application; (8) at least one year 
remaining on a San Francisco lease for space; and (9) 
demonstrated financial need for rent assistance and an 
at least 100 percent increase in annual rent. 

Evaluation of all of these nine conditions would be 
determined by a three-member selection panel, 
comprised of one representative of the Arts 
Commission chosen b3 r the Director of Cultural Affairs, 
one representative of the Grants for the Arts chosen by 
the Director of Grants for the Arts and a rotating third 
representative. The rotating third representative on 
the selection panel would be mutually selected by the 
Director of Cultural Affairs and the Director of the 
Grants for the Arts from one of the six art disciplines 
(i.e., visual arts, dance, theater, music, literary arts 
and new genre/multimedia) that corresponds to the 
applicant's organization. The selection panel would be 
required to reach a unanimous decision in order to 
provide funding for each nonprofit arts organization. 
In accordance with the proposed ordinance, the 
selection panel would meet as frequently, as needed. 
See Comment 3 regarding the relationship between 
the selection panel and the California Lawyers for the 
Arts. 

As further specified in this ordinance, the following 
five specific limits would be placed on the grant 
amounts for those eligible organizations: (1) limited to 
only the portion of rent that represents an increase 
over the prior year's rent; (2) an organization may not 
receive cumulative City rent assistance totaling mere 
than (a) 50 percent of the total annual rent or (b) 
$80,000 within a 12-month period; (3) limited to 12 
months, beginning on the application filing date, 
although organizations can reapply for subsequent 
years; (4) limited to one grant per leasehold, even if 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

3 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



multiple organizations share a single leasehold; (5) 
grants may only be used to pay for the specific 
leasehold identified in the application, and if grant 
funds are used for any other purposes, the applicant 
may be required to refund all grant monies, plus 
interest and the City's administrative costs to recoup 
such funds. 

In accordance with the proposed legislation, grants 
would generally be awarded on a first-come, first- 
served basis. Because there is not a specific deadline 
for all applications to be submitted for consideration at 
the same time, the proposed ordinance states that the 
$1,500,000 funding may be depleted before a 
potentially worthy applicant applies for funding. In 
fact, the proposed ordinance states that the selection 
panel may begin awarding grants immediately on the 
basis of completed application submittals, even in the 
absence of a formal standardized application form 
being developed by the California Lawyers for the 
Arts. 

The proposed ordinance would require that each grant 
recipient submit a report to the California Lawyers for 
the Arts within 30 days after the rent assistance grant 
period is over, verifying that the grant funds were 
spent on the specific leasehold. In turn, the California 
Lawyers for the Arts would be required to report to the 
Arts Commission every six months, identifying the 
applicants, the nonprofit arts organizations that 
received funding, the amount that each organization 
received, and a statement of the balance of the subject 
$1,500,000 appropriation, including interest earnings 
and administrative fees allocated. In addition, within 
two months after all of the $1,500,000 of funding is 
spent, the California Lawyers for the Arts would be 
required to submit a final summary report of activities 
to the Arts Commission. 

The proposed ordinance states that the California 
Lawyers for the Arts ma}' recoup a reasonable 
administrative fee, in the discretion of the Arts 
Commission, from the subject appropriation, and that 
reasonable compensation for the selection panel may 
be included in such administrative fees. As discussed 

BOARD OF SUPERVISORS 

BUDGET ANALYST 

4 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 

above in the Budget Section, the California Lawyers 
for the Arts has estimated total administrative costs of 
approximately $58,565 through June 30, 2001. In 
addition, the California Lawyers for the Arts would be 
required to hold the subject $1.5 million appropriation 
in an interest-bearing account, with the accumulated 
interest, to be added to the principal and expended for 
additional rent subsidy grants to nonprofit arts 
organizations. Any balance in this account at the close 
of the fiscal year would be carried forward to the next 
fiscal year for the continued same purposes. 

Under the proposed ordinance (File 00-1811), the Arts 
Commission or the California Lawyers for the Arts 
would be able to adopt additional reasonable rules and 
procedures to implement this legislation consistent 
with its purposes. Such additional rules and 
procedures would not be subject to Board of 
Supervisors approval. 

Comments: 1. According to Mr. Richard Newirth of the Arts 

Commission, the Arts Commission does not have 
sufficient staff to administer the proposed emergency 
rent subsidy program. In addition, Mr. Newirth 
advises that given the need to conduct public hearings 
with the Arts Commission's involvement, the Arts 
Commission probably cannot respond as quickly as 
necessary to the emergency needs of the proposed rent 
subsidy program. 

As a result, according to the Office of the Sponsor of 
the proposed legislation, the following four nonprofit 
organizations were contacted regarding their interest 
in administering the proposed emergency rent subsidy 
program: (1) Nonprofit Finance Fund; (2) Northern 
California Community Loan Fund; (3) Art Loan Fund; 
and (4) California Lawyers for the Arts. The Office of 
the Sponsor advises that three of these organizations 
were either not interested, did not have the 
administrative capacity to provide these services, or 
could not provide the services in a sufficiently timely 
manner. As a result, only the California Lawyers for 
the Arts submitted a responsive bid to this request. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

5 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 

2. Ms. Alma Robinson of the California Lawyers for 
the Arts advises that the California Lawyers for the 
Arts currently has four contracts totaling $282,000 
annually with the City of San Francisco, including (1) 
$30,000 from the Arts Commission to fund ArtHouse, 
a joint support services program for individual artists 
and art organizations, (2) $135,000 from the 
Department of Children, Youth and Their Families to 
provide afterschool and in-school art training and job 
assistance for youth, (3) $17,000 from the Superior 
Court to provide alternative dispute resolution 
services for arts-related issues, including arbitration 
and mediation services and (4) $300,000 for a three- 
year collaborative program (average of $100,000 per 
year) with the Department of Human Services and the 
Private Industry Council to provide welfare -to- work 
clients with training and job placements in the arts. In 
addition, Ms. Robinson advises that the California 
Lawyers for the Arts receives funding from the 
California Arts Council and the National Endowment 
for the Arts. According to Ms. Robinson, the California 
Lawyers for the Arts has a 14-person staff State-wide, 
with offices in San Francisco, Los Angeles, Sacramento 
and Oakland and a total current annual budget of 
approximately $700,000, of which $282,000, or 
approximately 40 percent is financed from City related 
funds. 

3. The proposed ordinance (File 00-1811) is silent 
regarding the relationship between the selection panel 
and the California Lawyers for the Arts. However, 
based on discussions with Ms. Robinson, it is assumed 
that the California Lawyers for the Arts would assist 
in convening, training and assisting the selection 
panel. Ms. Robinson also advises that their ArtHouse 
Program Director, who is a licensed California Realtor, 
would also be the Program Director for this proposed 
nonprofit art organization rent subsidy program, such 
that this Program Director is already providing 
technical assistance and lease negotiation services to 
some of these same nonprofit arts organizations. In 
addition, it is assumed that the selection panel would 
work directly with the California Lawyers for the Arts 
to immediately report the recommendations from each 
meeting, so that the rent subsidy funds could be 

BOARD OF SUPERVISORS 
BUDGET ANALYST 
6 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



quickly provided to the specified arts organizations. 
The Budget Analyst recommends that language be 
incorporated into the proposed ordinance (File 00- 
1811) to identify the relationship between the selection 
panel and the California Lawyers for the Arts. 

4. The Budget Analyst advises that since the proposed 
rental subsidies by their nature are ongoing expenses, 
it is possible that additional funds would be requested 
after the proposed $1,500,000 are depleted. The Office 
of the Sponsor of the proposed $1,500,000 
supplemental appropriation advises that this 
$1,500,000 request is intended to be a one-time 
emergency appropriation only. The Sponsor's Office 
reports that any future appropriations for rent 
subsidies to nonprofit arts organizations will need to 
be decided by the new Board of Supervisors next year. 
In addition, the Office of the Sponsor advises that 
additional legislation is also needed to address both 
intermediate and long-term solutions to the existing 
nonprofit arts organizations leasing of space in San 
Francisco. 

5. Another ordinance (File 00-1809), was recently 
introduced by the Board of Supervisors to appropriate 
$3,000,000 of General Fund Reserve monies, including 
$500,000 for rent subsidies to nonprofit arts 
organizations at risk of being evicted or displaced by 
rent increases and $2,500,000 for a capital project to 
acquire or develop rental space for arts organizations 
through the Mayor's Office of Community 
Development and the Department of Economic 
Development. That ordinance has not yet been heard 
by a committee of the Board of Supervisors. 

6. The Budget Analyst notes that the proposed 
ordinance (File 00-1811) requires that the selection 
panel include a rotating representative from one of the 
six specific art disciplines (i.e., visual arts, dance, 
theater, music, literary arts and new 
genre/multimedia) that corresponds to the applicant's 
organization. However, there is no language in the 
proposed ordinance restricting such art 
representatives from having any connection or 
financial interest in the subject application which they 

BOARD OF SUPERVISORS 
BUDGET ANALYST 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 

are reviewing and making recommendations for 
funding. Therefore, the Budget Analyst, with the City 
Attorney's concurrence, recommends that the proposed 
ordinance (File 00-1811) specifically state that the 
proposed selection panelists may not have any 
financial interest in the applications which are subject 
to their review. 

7. As noted above, within two months after all of the 
$1,500,000 of funding is expended, the California 
Lawyers for the Arts would be required to submit a 
final summary report of activities to the Arts 
Commission. The Budget Analyst recommends that 
the proposed ordinance be amended to require that 
such a summary report also be provided to the Board 
of Supervisors. 

8. Mr. Newirth advises that from January through 
September of 2000, the Arts Commission funded a 
consultant study by MacDougall & Company to 
document the impact of the escalation of real estate 
prices on arts organizations in San Francisco. 
According to Mr. Newirth, this $75,000 study was fully 
funded with a Hewlett Foundation grant. Attachment 
II from this San Francisco Space for the Arts Study- 
identifies 86 nonprofit arts organizations that have 
either lost their leases or will have leases expiring in 
the near future. According to this Study, these art 
organizations currently pay an average of $12.70 per 
square foot per year, although the currently quoted 
real estate average for comparable space in San 
Francisco is $55 per square foot per year, or 333 
percent more than these art organization's current 
rental rates. Attachment III specifically breaks down 
117,576 square feet of existing rental space for those 
48 nonprofit art organizations, by art discipline, that 
are at risk of losing their rental space by the end of 
2001 (two organizations are identified as evicted for a 
total of 50 organizations). Although the proposed 
ordinance is restricted to those nonprofit arts 
organizations that have at least a 12-month lease 
extension (month-to-month leases would not be 
eligible), if 24 organizations, or one-half of the 48 
fisted nonprofit art organizations that are at risk of 
immediately losing their rental space, were to apply 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

8 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 

for and receive the subject rent subsidies, it is 
estimated that an average of $60,060 ($1,441,435 
divided by 24 organizations) would be available for a 
12-month rent subsidy for each applicant. If it were 
assumed that all of the 48 nonprofit arts organizations 
were to apply for and qualify to receive rent subsidies, 
then an average of $30,030 would be available for a 
12-month rent subsidy for each applicant. 

Recommendations: 1. Amend the proposed ordinance (File 00-1811) to: (1) 
identify the relationship between the selection panel 
and the California Lawyers for the Arts, as discussed 
in Comment 3, (2) specifically restrict the selection 
panelists from having any financial interest in the 
applications which are subject to their review, as 
discussed in Comment 6, and (3) require that the 
California Lawyers for the Arts provide a final 
summary report to the Board of Supervisors, as 
discussed in Comment 7. 

Approval of the proposed ordinances, as amended, are 
policy matters for the Board of Supervisors. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

9 




iS-OO 09:11A P.05 

PHOE NO. : Oct. 12 2e£C B5:<J3Pri P4 

Attachment I 



California Lawyers for the Rrts 




page 3 




Program Director 


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12,365 


fldministratUie Haa't (temp) 


18,888 


Supplies 


1,896 


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588 


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788 


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I.BB8 


Organizational QuBrhead 


15.888 



$56,565 



10 




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14 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



Item 3 - File 00-1699 

Department: 

Item: 



Location: 

Purpose of 
Lease Agreement: 



Sub-Lessor: 

Sub-Lessee: 

No. of Sq. Ft.: 

Rent per Month: 

Annual Rent 
Payable by 
COFAM to the 
Airport: 



Term of Lease: 



Airport 

Resolution approving the sub-lease of warehouse space at 
245 South Spruce Avenue, South San Francisco, between the 
Corporation of the San Francisco Fine Arts Museums as sub- 
lessee and the City and County of San Francisco as sub- 
lessor, acting by and through its Airport Commission, as 
lessee. 

245 South Spruce Avenue, South San Francisco 



This new sub-lease would allow the Corporation of the San 
Francisco Fine Arts Museums, on behalf of the Fine Arts 
Museums of San Francisco, to sub-lease approximately 
30,429 square feet of warehouse space from the Airport, 
which the Airport is presently leasing from South City 
Industrial Company, LLC. The Corporation of the San 
Francisco Fine Arts Museums, the sub-lessee, would use the 
space for the storage of art and other equipment owned by 
the De Young Museum while the museum is undergoing 
renovation and refurbishment. 

City and County of San Francisco acting through the Airport 
Commission 

Corporation of the San Francisco Fine Arts Museums, a non- 
profit organization (COFAM) 

30,429 of warehouse space 

$22,822 or $0.75 per square foot per month 



$273,864 with annual CPI adjustments, plus a pro rata share 
of the Property Taxes and building operating expenses paid 
by the Airport under the terms of its lease with South City 
Industrial Company, LLC 

November 1, 2000 through October 30, 2005 (five years). 

BOARD OF SUPERVISORS 

BUDGET ANALYST 

15 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



Right of Renewal: 



Description: 



COFAM would have two options to extend the sub-lease for a 
period of six months each. 

On May 10, 1999, the Airport entered into a lease agreement 
previously approved by the Board of Supervisors in April of 
1999 (File No. 99-0673) with South City Industrial Company, 
LLC, a privately owned company, for the Airport to lease a 
building owned by South City Industrial Company, LLC, 
located at 245 South Spruce Avenue in South San Francisco. 
The building is comprised of approximately 562,936 square 
feet of office and warehouse space. The annual rent and 
operating costs payable by the Airport to South City 
Industrial Company, LLC is $6,176,077. 

Originally, the Airport had intended to make use of all of the 
space available at the 245 South Spruce Avenue site for 
expansion of office staff and for storage of Facilities and 
Operations Management documents and attic stock 1 . 
According to Mr. Gary Franzella of the Airport, however, 
after the lease had been entered into, the Airport decided to 
alter its original plan, and not relocate approximately 
306,931 square feet worth of fabrication shops and storage 
currently located at the Airport. The Airport operating 
functions that were relocated to the building at 245 South 
Spruce Avenue include, Human Resources, Airfield 
Development, and Reprographics offices, as well as Airport 
storage. These offices require 256,005 of the total of 562,936 
square feet that have been leased by the Airport. 

After the aforementioned change in plans, which occurred 
subsequent to the Board of Supervisors approval for the 
Airport to lease the South Spruce Avenue facility, a balance 
of approximately 306,931 square feet of this space leased by 
the Airport remained unoccupied (562,936 total square feet 
less 256,005 square feet presently occupied). Therefore, the 
Airport decided to sub-lease part of the unused portion of its 
facility. The Airport made its intention to sublet the unused 
portions of the 245 South Spruce Avenue property known to 
the Department of Real Estate (DRE). At approximately the 
same time the Airport made its intentions known to DRE, 



1 "Attic stock" refers to overages of various buildings materials associated with the construction of 
new buildings (e.g., ceiling tiles, light fixture covers, and carpet). 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

16 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 

COFAM approached DRE about leasing space to store 
artwork and supplies during the renovation and 
refurbishment of the De Young Museum. DRE found that 
the needs of the Airport and COFAM were compatible, and 
facilitated a sub-lease between them. The Airport is 
currently seeking other sub -tenants to occupy the remaining 
balance of 276,502 square feet of unoccupied space consisting 
of 306,931 square feet less this subject proposed sub-lease to 
COFAM of 30,429 square feet. 

The proposed resolution would authorize the Airport to sub- 
lease approximately 30,429 square feet of warehouse space to 
COFAM for the storage of art and equipment from the De 
Young Museum, while that museum is undergoing 
renovations and refurbishment. 

Comments: 1. Mr. Harry Quinn of the Department of Real Estate (DRE) 

advises that the proposed rental rate of $0.75 per square foot 
per month represents fair market value. 

2. According to Mr. Steve Dykes of COFAM, COFAM is a 
non-profit corporation that raises private revenue to finance 
approximately 70 percent of the operations of the San 
Francisco Fine Arts Museum. The other 30 percent of 
operations is financed by the City from the City's General 
Fund. According to Mr. Dykes, rent for the proposed sub- 
lease would be paid to the Airport from COFAM private 
funds. 

3. According to Mr. Quinn, because COFAM is a non-profit 
entity that is essentially a public-private partnership with 
the City, DRE regularly conducts business with COFAM as if 
COFAM were a City department. According to Mr. Quinn, 
for this reason, the sub-lease was facilitated directly between 
the Airport and COFAM, and was not conducted through a 
competitive process. 

4. According to documents provided by the Airport, rent for 
the proposed sub-lease tenant, COFAM, would be abated by 
the Airport for the first 6 months of the sub-lease agreement 
because COFAM would use the first 6 months of the 
proposed sub-lease to make improvements to the property. 
At the conclusion of the sub-lease, the warehouse space, with 
the new improvements, would revert back to the Airport for 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

17 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



the remainder of the Airport's lease with South City 
Industrial Company, LLC. 

5. According to Mr. Dykes, improvements to the site in the 
first 6 months of the sub-lease would total between $1.2 and 
$1.5 million, and would consist of construction of the interior 
space of the sub-leased area to include office space, a storage 
area, and some restoration lab space. Mr. Dykes states that 
improvements would be paid for entirely by COFAM. Mr. 
Dykes notes that the proposed sub-lease agreement provides 
that, at the end of the sub-lease period, COFAM would 
remove any improvements not wanted by the Airport at no 
cost to the Airport. 

6. The term of the proposed sub-lease between the Airport 
and COFAM is from November 1, 2000 through October 30, 
2005 (five years), with two six-month extensions lasting 
through October 30, 2006 (which would bring the total lease 
term to six years). The term of the Airport's lease with South 
City Industrial Company, LLC is from May 1, 1999 through 
April 30, 2009 (10 years), with the two 5-year options to 
extend at the sole discretion of the Airport, which would 
bring the total lease term to 20 years. If the Airport opts to 
extend the current lease between itself and South City 
Industrial Company, LLC, the Airport would have the 
benefit of the $1.2 to 1.5 million in improvements made by 
COFAM under the subject sub-lease for up to 13.5 years, 
until April 30, 2019, assuming such improvements were the 
type of improvements needed by the Airport or its sub- 
tenants. 

7. Mr. Franzella notes that the subletting of the subject 
Airport-leased space is primarily a cost recovery effort. 
While the Airport currently leases the subject space for 
approximately $.73 per square foot, COFAM would sublet the 
same space from the Airport for approximately $.75 per 
square foot, which is $.02 per square foot or approximately 
2.7 percent more than what it costs the Airport to lease that 
space. This differential would total approximately S609 per 
month, or approximately $32,886 of revenue for the entire 
period of the 5-year lease following the initial 6-month 
construction period. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

18 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



8. Attachment I to this report, provided by DRE, is an 
explanation by Mr. Anthony DeLucchi, Director of Property 
at DRE, of the merits of the proposed sub-lease with 
COFAM. 

9. According to Mr. Franzella of the Airport, the new 
revenues that would be gained from the proposed sub-lease 
were not included in the Airport's FY 2000-2001 budget. 

10. Mr. Franzella states that unexpectedly high costs of 
between $9,000,000 and $10,000,000 for the expected 
renovations necessary to relocate shops to 245 South Spruce 
Avenue, which were discovered only after execution of the 
lease agreement between the Airport and South City 
Industrial Company, LLC, which had been recommended by 
the Airport to and approved by the Board of Supervisors, 
required the Airport to alter its original plan to occupy all of 
that space. Attachment II, provided by Mr. Franzella of the 
Airport, is an explanation of why the original plans to fully 
occupy the warehouse space at 245 South Spruce Avenue 
were altered. Mr. Franzella states that said renovation costs 
were not specifically known at that time, and that he does 
not recall why the Airport did not make neither the Budget 
Analyst nor the Board of Supervisors aware of these expected 
renovation costs. 

11. The Budget Analyst notes that the Airport provided 
incomplete information to the Budget Analyst and the 
Finance and Labor Committee when the resolution for the 
245 South Spruce Avenue lease was originally submitted for 
approval in April of 1999 (File No. 99-0673). Specifically, 
neither the Budget Analyst, the Finance and Labor 
Committee, nor the full Board of Supervisors was informed 
that renovations would be required for the Airport to 
accomplish the proposed move of maintenance shops to make 
use of much of the warehouse space at 245 South Spruce 
Avenue. As previously noted, the Airport did not provide 
estimates for such renovations to the Budget Analyst, the 
Finance and Labor Committee, or the full Board of 
Supervisors. 

12. The Budget Analyst's April of 1999 report to the Finance 
and Labor Committee regarding the lease at 245 South 
Spruce Avenue, provided estimates of new revenue based on 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

19 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



information provided to the Budget Analyst by the Airport 
(File No. 99-0673). Specifically, the Airport stated to the 
Budget Analyst that, as a result of the Airport's 10-year lease 
with South City Industrial Company, LLC, the Airport would 
realize revenues from vacated space on Airport property, and 
by sub-leasing space at 350 Harbor Way that would be 
vacated by the Airport. Estimated new revenues to the 
Airport as projected by the Airport and reported to the 
Budget Analyst resulting from such vacated space totaled 
$3,694,051, as shown in the table below: 



Airport Space to 
be Vacated 


Square Feet 


Projected Rental 
Rates 


Projected 
Annual 
Revenue 


On-site Warehouse 
Space 


153,431 sq. ft. 


$21.00/sq. ft. 
($1.75/sq. ft. per month) 


$3,222,051 


On-site Human 
Resources Office 
Space 


2,900 sq. ft. 


$80.00/sq. ft. 
($6.67/sq. ft. per month) 


$232,000 


Storage space at 
350 Harbor Way 


25,000 sq. ft. 


$9.60/sq. ft. 
($0.80/sq. ft. per month) 


$240,000 


TOTAL 






$3,694,051 



According to the Airport, this new additional annual revenue 
would offset the cost of the Airport's lease previously 
approved by the Board of Supervisors between the Airport 
and South City Industrial Company, LLC. This lease 
obligated the Airport to pay total annual rental and 
operating costs of $6,176,077 which would be offset by 
$3,694,051 in new revenue per year, reducing the potential 
net cost increase of the proposed lease to $2,482,026 
annually. 

13. Mr. Franzella now reports in Attachment II that the 
actual new rental revenue resulting from vacated space at 
the Airport, as described below, is a result of the Airport's 
information technology and telecommunications department 
(ITT) occupying the vacated Human Resources space, and not 
being forced to occupy commercial space in the new 
International Terminal. The commercial space that ITT 
would have occupied is expected to be leased to major airline 
companies within a relatively short period of time. The 
vacated Human Resources space has thus resulted in 
revenues as indicated in the table below. Mr. Franzella 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

20 






Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



further reports that the actual revenue realized from sub- 
leasing of storage space at 350 Harbor Way is $182,244, or 
$57,756 annually less than the $240,000 estimate shown in 
the table above. 

The table below summarizes the new sub-lease revenue the 
Airport has realized to date. 



Space Vacated 


Square Feet 


Rental Rates 


Actual 
Revenue 


HR Office Space, 
Subsequently 
Occupied by ITT 


2,900 sq. ft. 


$81.73/sq. ft. 
($6.81/sq. ft. per month) 


$237,017 


Storage space at 
350 Harbor Way 


25,000 sq. ft. 


$7.29/sq. ft. 
($0.61/sq. ft. per month) 


182,244 


TOTAL 






$419,261 



The Budget Analyst notes that the actual new additional 
annual rental revenue to be realized by the City from 
vacated Airport space shown above as $419,261 is $3,274,790 
or 88.7 percent less than the annual amount projected by the 
Airport of $3,694,051 and reported to the Budget Analyst and 
the Board of Supervisors in April of 1999. Mr. Franzella 
states that the Airport is working with DRE to secure 
additional sub-tenants that will offset this significant 
difference in unrealized revenues. 

14. Mr. Franzella notes, however, that the current lease at 
245 South Spruce Street allowed the Airport to forego 
approximately $935,000 in one-time infrastructure costs at 
the Airport that would have been required to move ITT into 
the next best available space at the Airport (see Attachment 
II to this report). 

15. In summary, if the Board of Supervisors approves the 
proposed sub-lease to COFAM, the lease of space at 245 
South Spruce Avenue would generate annual revenue as 
follows: 



Proposed Fine Arts Museum Sub-lease 
Sub-lease of 350 Harbor Way 
Space not being occupied by ITT 
Total 



$273,864 
182,244 
237.017 

$693,125 



BOARD OF SUPERVISORS 

BUDGET ANALYST 

21 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



Additionally, the current lease allows the Airport to forego 
approximately $935,000 in one-time infrastructure 
improvement costs at the Airport. 

16. In summary, the Airport's original justification for the 
lease of 245 South Spruce Avenue in South San Francisco 
was based on the fact that the Airport's urgent needs for new 
space would be met and that significant new revenue from 
the lease of on-Airport space vacated by Airport functions 
would reduce the $6,176,077 annual rent and operating cost 
of the lease previously approved by the board of Supervisors 
at 245 South Spruce Avenue by $3,694,051 to $2,482,026. 

Subsequent to the execution of the lease of the property after 
the Board of Supervisors approval, the Airport determined 
that the actual cost of required improvements to warehouse 
space of between $9,000,000 and $10,000,000 was 
significantly more than preliminary estimates, making the 
transfer of functions from the Airport to the 245 South 
Spruce Avenue warehouse space infeasible. At the time the 
Airport submitted the proposed resolution for the lease of 245 
South Spruce Avenue to the Board of Supervisors for 
approval, the Airport did not disclose that any costs would be 
incurred for renovation of the warehouse space. Because 
functions have not been transferred from the Airport to 245 
South Spruce Avenue, approximately 306,931 square feet, or 
54.5 percent of space the Airport leased in South San 
Francisco from South City Industrial Company, LLC, is now 
not being utilized at all, and the Airport is not fully realizing 
the previously estimated additional total revenue of 
$3,694,051 annually. 

Based on the fact that the Airport did not perform an 
adequate assessment of the costs of renovation required for 
the 245 South Spruce Avenue property, and that subsequent 
review produced an estimate of $9,000,000 to $10,000,000 in 
such costs, making relocation infeasible, the Budget Analyst 
concludes that the original lease submitted to the Board of 
Supervisors in April of 1999 was not adequately justified, 
and should not have been recommended to the Board of 
Supervisors. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

22- 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



17. The proposed sub-lease to COFAM would result in new 
annual revenue to the Airport of $273,864. If the proposed 
sub-lease is approved, the Airport would still be paying rent 
on 276,502 remaining square feet of space at 245 South 
Spruce Avenue that is unoccupied and not being used by the 
Airport. The Airport now states that it intends to sub-lease 
the remaining 276,502 square feet of space as soon as 
possible. The Budget Analyst notes that there are no 
guarantees regarding the amount of space that the Airport 
will actually be able to sublet, or additional revenues the 
Airport will realize from space it does sublet. 



Recommendation: Approve the proposed resolution. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

23 




City and County of San Francisco Real Estate Division 

Administrative Services Department 

October 19, 2000 

Airport 

COFAM Sublet 
Harvey Rose 
Budget Analyst 
1390 Market SL 
San Francisco, CA 94102 

Dear Mr. Rose: 

Your staff has requested our opinion of the COFAM (DeYoung) sublease at 245 
So. Spruce from the Airport. 

As you are aware, the Airport has decided not to occupy the entire facility. Also, 
COFAM is in need of highly sacura temporary facilities during the renovation of the 
DeYoung Museum. There appears to be a natural fit of needs. 

The proposed sublease transaction was negotiated to start at approximately the 
Airports cost of space (.75 psf) and increase annually (unlike the City's lease) by the 
proportionate increase in the Consumer Price Index. Critical to the transaction is that 
the DeYoung will be making all of the improvements — estimated to cost $1,500,000. 
The estimated time to complete these improvements (design, permit, and build) is 6 
months. 

For this transaction, it made sense to have COFAM complete all of the 
improvement work. Typically, tenants do not pay rent until at least the base building 
improvements (demising walls, bathrooms, etc.) are completed by the landlord (which in 
this case would be the City). For the Airport's benefit, the sublease is structured to limit 
the construction penod to 6 months. . 

Clearly, the substantial COFAM improvements being made to the facility 
(mechanical, electrical, plumbing, etc.) will have reuse value for either the Airport or 
another 3 rd party subtenant at the expiration of COFAM's lease. 

We hope the above answers your questions. If ycu have any further questions, 
please contact Chariie Dunn of our office at 554-9861 . 




tthcny 5?DeLaqchi 
Director of Property 



cc: Gary Franzslla, SRA 



(415) 554-9850 Office of the Director of Property 

FAX: (415) 552-3216 25 Van Ness Avenue, Suite 400 San Francisco, 94102 



24 



Aitacnmenu 11 
Page 1 of 4 



AIRPORT COMMISSION 

SAN FRANCISCO INTERNATIONAL AIRPORT 

CITY AND COUNTY OF SAN FRANCISCO 



MEMORANDUM 



TO: Daley Dunham, Jr. 

Budget Analyst Office 

FROM: Gary Franzella^^ 

Assistant DetfiiuyAir' 

SUBJECT: Proposed Sub-lease to Fine Arts Museums 



DATE: October 17, 2000 



The following is offered in response to your inquiries regarding the lease of the property at 245 
Spruce Avenue, South San Francisco, California: 

Background: 

In early 1999, the Airport was preparing for an expansion from 6,000,000 sq. ft. to 1 8,000,000 
sq. ft. as the Master Plan was nearing completion. It was clear that maintenance support of the 
additional terminal space would require not only additional staff but also substantial space to 
accommodate the additional supplies and maintenance materials. 

At that time, the Airport was also critically short of office space for Human Resources staff and 
was assembling an Airfield Development Bureau to begin the planning for a proposed major 
runway expansion. In addition, the Airport's Information, Telecommunications and 
Technology department needed to expand to meet the needs of the New International Terminal 
Complex. It was determined at that time mat neither the additional personnel support areas, 
nor the storage of supplies and materials, could be accommodated on-site at the Airport. 

To address these needs, Airport staff working through the Department of Real Estate ("DRE"), 
was seeking off-airport office space to house expanding airport staff in Human Resources and 
the new Airfield Development Bureau, as well as additional warehouse space. DRE located 
two office facilities and offers were made which were lost because the City was outbid in what 
was a fast paced commercial real estate market. 

Housing the Airfield Development Bureau was becoming critical when DRE became aware of 
the availability of the facility at 245 South Spruce Avenue. This facility met the Airport's 



25 



Page 2 of U 



Daley Dunham. Jr. 
October 18,2000 
Page 2 



immediate needs for both office and warehouse space. It also offered the Airport a facility in 
which multiple functions could be consolidated. Because of the size of the warehouse, the 
facility also provided a unique opportunity to consider additional uses at the site. 

An initial conceptual review indicated that moving the Airport Facility Operations and 
Maintenance shops to this off-site location was feasible and could free land on-airport for lease 
to airlines and/or aviation support companies. The state of the real estate market in 1999 did 
not allow time for design or extensive cost estimates for improvements prior to executing the 
lease. If moving the FOM shops to the site proved to be unfeasible, the Airport was aware that 
subletting the facility at or above the negotiated rental rale was very likely. 

Following the negotiation of the lease and Board of Supervisor approval, the phase one 
development of the office area commenced, to be followed by a preliminary design of the shop 



Proposed Use of Facility: 

Phase two analysis commenced in late 1999 and by mid 2000 revealed that improvements to 
facilitate the intended move of the shops would cost between nine and ten million dollars.. The 
airport was aware that one of the trade-offs to the shop relocation was an additional six to ten 
minules in travel lime between the site and the Airport for shop personnel. The high cost of 
improvements necessary for implementation, along with the additional travel time, led to a 
decision not to move the shops to Spruce Avenue. At that time, in accordance with the planned 
alternative, the Business Division of the Airport was tasked with finding sub-tenants at the 245 
Spruce Avenue facility. 

Working through DRE multiple prospective sub-tenants have been identified with varying uses 
at the site. This is the first such sub-lease to be finalized. 

Current Location of Personnel and Materials : 

The FOM shops are currently housed on-airport in a facility that is sub-leased from Northwest 

Airlines through 2005. The Airport has taken an approach to establish satellite shops within 

the New International Terminal Complex and this has allowed for housing 

of additional personnel for the current time period. The Airport is exploring alternatives for 

on-airport locations that may accommodate expanded shops to meet future needs. 

All Airport storage needs have been accommodated at the Spruce Avenue facility. This 

133,000 square foot storage facility has been implemented at the site without any capital 

investment in improvements. During the final stages of the New International Terminal, 

approximately 60,000 additional square feet are being utilized for interim storage. 



26 



Attachment II 
Page 3 of 4 



Daley Dunham, Jr. 
October IS, 2000 
Page 3 



Current Utilization of the Site: 

The following is a chart detailing the current utilization of the facility: 

Office Area: 45, 674 sq.ft. 
Occupants: 

Human Resources: 61 employees 

Airfield Development Bureau: 64 employees 

Reprographics 17 employees 

Mezzanine Area: 3,33 1 sq. ft. 

This is a multi-purpose area used for HR examinations, interviews and conference rooms 

used by multiple departments of the Airport 

Warehouse: 513,931 sq. ft. 

Occupants: 

Airport Storage: 133,000 sq. ft 

Temporary Storage: 60,000 sq. ft. 
Reprographics Equipment /storage area: 14,000 sq. ft. 

Proposed Museum sub-lease: 30,429 sq. ft. 

Available for sub-lease: 276,502 sq. ft 



Revenue Summary; 

The Airport has vacated its leased space at 350 Harbor Way in South San Francisco and 
consolidated storage within the Spruce Facility. The facility at 350 Harbor Way was sub-let in 
September 1999 through the end of the Airport lease term. (June 30, 2002). 

The following is a summary of revenues, including the revenues from the sub-lease of 350 
Harbor Way: 

Annual Revenue 
Fine Ans Museums Sub-lease S 273, 861 

Sub-lease of 350 Harbor Way 182,244 

Total Sub-lease Revenues $ 456,105 



Other Revenue Benefits: 

Prior to the lease of Spruce Avenue, the Human Resources Department occupied 2,900 square 
feet of space in the current international terminal. The Airport has subsequently utilized -that 
space to accommodate the additional Airport TIT staff, critical to the start-up of the New 
International Terminal Complex. ITT staff, by the nature of their duties, were determined to be 
on-site critical. The only other available space within the Airport complex at that time was in 
the New International Terminal. The relocation of the Human Resources Department to the 
Spruce property provided the flexibility of expanding ITT into the former Human Resources 



27 



Page 4 of '» 



Daley Dunham, Jr. 
October 18.2000 
Page 4 



space. Although not in the original plan, this flexibility saved the expenditure of additional 
costs associated with the build out of "remote" ITT expansion space in the New IntcmationH 1 
Terminal Such a relocation would have not only added cost as outlined below, but the timing 
of accomplishing rhis alternative would have potentially impacted the opening date of the New 
International Terminal Complex. 

Because the Human Resources space was adjacent to the existing ITT space it was not 
necessary to incur additional costs to establish "remote" HT infrastructure. In addition, the 
use of space in the New International Terminal for an airport function would preclude the lease 
of said space to airlines. 



Cost Savings: 

One-time cost of build out of office space @ $150/sq. ft.: $ 435,000 

**ITT infrastructure costs associated with "remote" offices: S 500.000 

Total cost savings: $ 935,000 

Lost Revenues: 

Lost annual rental revenue @S81. 73* sq. ft per year: S 237,017 



Notes: 

* $81.73 is the current rental rare for airport terminal office space established each fiscal year in accordance 
with the Airline Lease and Use Agreements. 

" This is the additional iTT infrastructure cost estimated to establish a "remote" ITT operation. 



28 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



Item 4 -File 00-1723 

Department: 

Item: 



Amount: 
Source of Funds: 

Description: 



San Francisco Community College District (SFCCD) 

Ordinance appropriating $29,605,000 of General 
Obligation Bonds (Educational Facility Bonds, 1997 - 
SFCCD) Series 2000A proceeds for general renovation of 
SFCCD structures, adding health and safety features 
which bring the structures into ADA compliance, and 
telecommunications facilities, and costs of issuance. 

$29,605,000 

General Obligation Bonds (Educational Facility Bonds, 
1997 - SFCCD) Series 2000A, hereafter referred to as 
"Educational Facility Bonds, Series 2000A". 

On June 3, 1997, a total of $50,000,000 in General 
Obligation Bonds for the acquisition, construction, and/or 
reconstruction of SFCCD educational facilities was 
approved by the electorate. The first series of 
Educational Facility Bonds (Series 1999A) was issued on 
June 16, 1999 in the amount of $20,395,000. Bond 
proceeds were appropriated for the acquisition, 
construction, and/or reconstruction of SFCCD education 
facilities by approval of the Board of Supervisors on 
October 18, 2000 (File 99-1573). 

The second series of Educational Facility Bonds (Series 
2000A) were issued on June 14, 2000 in the amount of 
$29,605,000 following approval by the Board of 
Supervisors on May 1, 2000 (File 00-0677). When added 
to the Series 1999A Bonds issued on June 16, 1999 in the 
amount of $20,395,000, the subject amount of $29,605,000 
represents the full balance of the $50,000,000 in General 
Obligation Bonds approved by the electorate for the 
acquisition, construction, and/or reconstruction of SFCCD 
educational facilities. The Educational Facility Bonds, 
Series 2000A will fund the balance of the SFCCD's 
acquisition, construction, and/or reconstruction program. 

The subject supplemental appropriation would 
appropriate $29,605,000 in Bond proceeds for the 
following: (a) $8,251,341 for health and safety upgrades; 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

29 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



Budget: 



(b) $7,427,791 renovation projects; (c) $10,512,120 for 
technology and electrical improvements; (d) $741,760 for 
ADA projects; (e) $1,725,983 for childcare facilities; (f) 
$804,207 for site acquisitions; and (g) $141,798 for Bond 
issuance costs. 

The budget for the appropriation of the $29,605,000 in 
Bond proceeds is summarized as follows: 





Total 




Estimated 


Purpose of Appropriation 


Costs 


Health and safety upgrades 


$8,251,341 


Renovation projects 


7,427,791 


Technology, network, and 


10,512,120 


electrical upgrades 




Disability access improvements (ADA) 


741,760 


Childcare facilities 


1,725,983 


Land acquisitions 


804.207 


Subtotal 


$29,463,202 


Bond Issuance Costs 


141.798 


TOTAL 


$29,605,000 



The Attachment, provided by Mr. Peter Goldstein of the 
SFCCD, contains a detailed budget for the entire 
$50,000,000 program for the acquisition, construction, 
and/or reconstruction of SFCCD educational facilities 
funded by Educational Facility Bonds, Series 1999A and 
Series 2000A 



Comments: 



1. In November 1997, the Board of Supervisors 
authorized and directed the sale of General Obligation 
Bonds (Educational Facility Bonds, 1997 - SFCCD) Series 
1998B not to exceed $17,000,000 (Resolution No. 1027- 
97). The Bond issuance was delayed due to litigation 
related to Proposition D which had been pHced on the 
same June 3, 1997 ballot to authorize the City to issue 
Football Stadium Bonds. This litigation delayed bond 
counsel issuing a final opinion on the validity of the 
SFCCD Bonds. Consequently, the SFCCD requested that 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

30 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



additional Bond funds be authorized and issued to cover 
project costs for an additional year. On March 1, 1999 the 
Board of Supervisors authorized and directed the sale of 
Educational Facility Bonds, Series 1999A not to exceed 
$23,000,000 (File 99-0197), thereby replacing the previous 
authorization of $17,000,000. However, as noted above, 
the SFCCD sold only $20,385,000 of the $23,000,000 
Bond issuance authorized by the Board of Supervisors 
(File 99-1154). 

Educational Facilities Bonds, Series 2000A were approved 
by the Board of Supervisors on May 1, 2000 (File 00-0677) 
and were issued on June 14, 2000. The total Bond 
proceeds for Educational Facility Bonds, Series 2000A, 
inclusive of bond issuance costs of $141,798, are in the 
amount of $29,605,000. 

2. According to Mr. Goldstein, the SFCCD has not 
expended or encumbered any of the Series 2000A Bond 
proceeds in advance of Board of Supervisors appropriation 
approval. 

3. As shown in the Attachment, there have been some 
changes in specific project expenditures since the original 
1997 project budget submitted with the ballot measure for 
voter approval of the $50,000,000 in General Obligation 
Bonds. However, these changes are either relatively 
minor in percentage terms or can be explained by the 
addition of State Maintenance Funds allocated to the 
SFCCD (see Comment No. 4 below). 

4. According to Mr. Goldstein, the SFCCD has been 
awarded $2,380,980 in State Maintenance Funds in 
relation to Educational Facility Bonds, Series 1999A 
expenditures for health and safety upgrades and for 
technology, network, and electrical upgrades (as shown in 
the table below). The SFCCD expects to be awarded a 
further $850,000 in relation to Educational Facility 
Bonds, Series 2000A expenditures for health and safety 
upgrades and for technology, network, and electrical 
upgrades, for an estimated total of $3,230,980 in State 
Maintenance Funds to supplement the $50,000,000 in 
Bond proceeds. Therefore, total funding is estimated to 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

31 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



be $53,230,980, as shown in the Budget Analyst's footnote 
to the Attachment. 

5. According to Mr. Goldstein, the SFCCD estimates that 
previously appropriated Bond funds have realized interest 
earnings to date of approximately $700,000. Of this 
amount, the SFCCD has allocated $300,000 to remodeling 
its Educational Opportunity Program and Services facility 
which provides services for disadvantaged, at-risk 
students. Mr. Goldstein states that the balance of 
approximately $400,000 is being reserved as a 
contingency budget for unforeseen project costs. 
Expenditure of such interest earnings will be subject to 
future Board of Supervisors appropriation approval. 

6. City departments responsible for expenditure of 
General Obligation Bond proceeds are required by the 
General Obligation Bond Accountability Reports 
Ordinance (Part I of the San Francisco Administrative 
Code, Article VIII, Sections 2.70 through 2.74) to submit 
formal reports on the actual expenditure of Bond proceeds 
to the Board of Supervisors. According to Mr. Dave 
Sanchez of the City Attorney's Office, the General 
Obligation Bond Accountability Reports Ordinance does 
not apply to a non-City entity such as the SFCCD. 
However, the SFCCD does provide the Budget Analyst's 
Office with regular reports on its expenditure of Bond 
proceeds. 



Recommendation: Approve the proposed ordinance. 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

32 



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36 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



Item 5 - File 00-1789 

Department: 

Item: 



Amount: 
Source of Funds: 



Public Utilities Commission (PUC) 

Resolution approving the expansion of the Public Utilities 
Commission Commercial Paper Program by increasing 
the aggregate principal amount which may be 
outstanding at any one time of San Francisco Public 
Utilities Commission Commercial Paper Notes (Water 
Series) by $100,000,000 from $150,000,000 to 
$250,000,000 pursuant to Article V of Chapter 43 of Part I 
of the San Francisco Municipal Code for the purpose of 
financing and refinancing certain capital improvements 
related to the Water Enterprise; approving the maximum 
interest rate thereon; and related matters. 

$250,000,000 

Commercial Paper Notes, to be repaid with Water 
Revenue Bonds. 



Background: 



On November 4, 1997 voters approved two Water 
Revenue Bond issues in the total amount of $304,000,000. 
Specifically, the voters approved 

• Proposition A, authorizing the City to issue 
$157,000,000 in Water System Reliability and Seismic 
Safety Revenue Bonds for the purpose of providing 
funds for acquiring and constructing reliability and 
seismic safety improvements to the City's water 
system (File 60-97-4). 

• Proposition B, authorizing the City to issue 
$147,000,000 in Safe Drinking Water Improvement 
Revenue Bonds for the purpose of acquiring and 
constructing safe drinking water improvements 
related to the City's water system (File 60-97-5). 

On June 8, 1998 the Board of Supervisors approved the 
procedures for PUC to issue Commercial Paper in 
anticipation of the issuance of Water Revenue Bonds (File 
98-738). Commercial paper is a short-term financing 
instrument used by both corporations and municipal 
issuers as bridge financing until long-term financing is 
issued. It is used on an as-needed basis to meet short- 



BOARD OF SUPERVISORS 
BUDGET ANALYST 

37 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



term cash demands. In contrast to the 30-year Revenue 
Bonds which are generally issued to finance the PUC's 
capital costs, Commercial Paper maturities range from 
one to 270 days. The term and interest rate of each 
Commercial Paper sale is determined on the day of the 
sale, and varies according to the PUC's cash needs and 
market conditions. Over the past 10 years, Commercial 
Paper interest rates in California have averaged over 2 
percent less than 30-year Revenue Bond interest rates. 
Therefore, Commercial Paper can be used as a short-term, 
low-cost source of construction financing prior to the sale 
of long-term Revenue Bonds. 

On May 17, 1999 the Board of Supervisors approved the 
issuance of: 

• Up to $150,000,000 of PUC Commercial Paper Notes 
(Water Series), secured by a Letter of Credit and 
Reimbursement Agreement (Letter of Credit), for the 
purpose of financing and refinancing water system 
improvements, and for the costs of issuance and other 
related costs (File 98-2026). The Board of Supervisors 
approved a maximum rate of interest for the 
Commercial Paper of 12 percent annually. According 
to Mr. Phil Arnold of the PUC, the range of actual 
interest rates obtained by the PUC since its first sale 
of Commercial Paper has been 2.65 percent to 4.3 
percent in contrast with the interest rate range for 30- 
year Revenue Bonds of 5.65 percent to 6.8 percent 
over the same period of time. 

• Up to $140,000,000 of Water Revenue Bonds, for the 
purpose of funding water system improvements, debt 
service reserves, and costs of issuance, including 
redemption premiums, and other related costs (File 
99-0784). These long-term Revenue Bond proceeds 
were authorized to repay the short-term Commercial 
Paper debt described above. The debt service on these 
Revenue Bonds are to be repaid from Water 
Department revenues and not from the General Fund. 
Mr. Arnold states that no Water Revenue Bonds have 
been issued to date. The first sale is anticipated to be 
held in late Spring of 2001. If interest rates continue 
to be reasonable and the size of the FY 2001/02 capital 
improvement program warrants it, the PUC is likely 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

38 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



to issue Water Revenue Bonds up to the authorized 
maximum of $140,000,000. According to Mr. Arnold, 
the exact timing of the sale during 2001 would be 
determined by the most advantageous interest rates. 
Mr. Arnold further notes that the PUC always has the 
option to refinance its Revenue Bonds should interest 
rates subsequently decrease. 

The PUC's Commercial Paper program is not backed by 
General Fund Revenues and does not create any exposure 
to the General Fund. Underwriting of the Commercial 
Paper is provided by a team consisting of Lehman 
Brothers and Lam Securities Investment, Inc. 1 

Under the First Supplemental Issuing and Paying Agent 
Agreement, Chase Manhattan Bank and Trust Co., N.A. 2 
makes principal and interest payments when they become 
due for any Commercial Paper which has been issued, and 
the PUC reimburses Chase Manhattan from additional 
Commercial Paper proceeds. 

A Letter of Credit from two banks, (a) Bayerische 
Landesbank Gironzentrale and (b) the State Street Bank 
and Trust Company 3 , provides the necessary security for 
the Commercial Paper. The Letter of Credit, which has a 
limit of $150,000,000, is the equivalent of a line of credit 
for the Commercial Paper Program, guaranteeing that the 
Commercial Paper buyers will be repaid immediately on 
each roll date (the maturity date for a Commercial Paper 



1 The PUC held a Request for Proposals process in May of 1998. The PUC received six proposals, 
and selected two teams after evaluating the proposals based on criteria specified in the RFP, 
including firm capacity and experience, assigned project staff, and cost. One team comprised 
Lehman Brothers and Charles A. Bell (a MBE firm), the other team comprised Goldman Sachs and 
Lam Securities Investment, Inc. (a MBE firm). According to Mr. Arnold, Goldman Sachs withdrew 
from the selection process and Charles A. Bell was acquired by another MBE firm whose annual 
revenue was too great to qualify for MBE preference ratings from the Human Rights Commission. 
Therefore, the PUC instead approved a team of Lehman Brothers and Lam Securities Investment, 
Inc. 

2 Chase Manhattan was selected through a Request for Proposals process. Although Chase 
Manhattan was a close second in terms of determining the highest scoring firm, the top scoring firm 
declined to comply with Chapter 12B of the City's Administrative Code pertaining to the Equal 
Benefits Ordinance. Therefore, the PUC selected Chase Manhattan instead. 

3 The PUC selected these two banks bidding together as a syndicate after a competitive bid process 
held in December of 1999. The PUC received three bids, and selected the bid which offered the 
lowest basis points (split between 35 basis points for the PUC's principal outstanding and 15 basis 
points for the balance). 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

39 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



Note when it becomes due for resale at a new rate). As a 
result, the credit rating for the Commercial Paper is 
based on the short-term credit rating of those two banks, 
rather than on the PUC's credit rating. The Board of 
Supervisors previously authorized a five-year term for the 
Letter of Credit, which is in effect from July 22, 1999 
through July 21, 2004. Assuming no extensions or 
contract modifications (which would require authorization 
by the Board of Supervisors), the PUC would have to sell 
the long-term Water Revenue Bonds, or appropriate other 
legally available funds, in order to pay back the 
Commercial Paper no later than July 21, 2004. However, 
as noted above, the PUC expects to sell $140,000,000 in 
long-term Water Revenue Bonds in late Spring of 2001, 
subject to Board of Supervisors approval and PUC 
estimation of interest rate fluctuations during the course 
of 2001. 



Description: 



Under the subject resolution, the PUC would expand the 
aggregate principal amount which could be outstanding at 
any one time in its Commercial Paper Program from 
$150,000,000 to $250,000,000, an increase of 
$100,000,000 or approximately 66.7 percent. Under the 
proposed expanded Commercial Paper program, Lehman 
Brothers and Lam Securities Investment, Inc. would 
continue as the underwriting team, and Chase 
Manhattan Bank would continue as the Issuing and 
Payment Agent. The Letter of Credit from Bayerische 
Landesbank Gironzentrale and the State Street Bank and 
Trust Company would be increased from $150,000,000 to 
$250,000,000, and a third bank, Morgan Guaranty, would 
become a party to that expanded Letter of Credit 4 . The 
maximum allowable interest rate of 12 percent would 
remain unchanged. However, according to Mr. Arnold, 
the actual interest rates are anticipated by PUC to be 
much lower. 



Comments: 



1. Of the $304,000,000 authorized by voters for Water 
Revenue Bonds, the Board of Supervisors has, to date, 
only approved issuance of up to $150,000,000 in 
Commercial Paper. Of this total of $150,000,000, the 



4 Mr. Arnold states that Bayerische Landesbank Gironzentrale and the State Street Bank and Trust 
Company would each be responsible for $100,000,000, while Morgan Guaranty would be responsible 
for $50,000,000. 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

40 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



PUC has issued $41,000,000 which leaves $109,000,000 of 
the original Commercial Paper authorization unsold, 
according to Mr. Arnold. The $304,000,000 Water 
Revenue Bond authorization represents a key initial 
funding source for the current PUC capital improvement 
program which has an estimated total cost of 
$3,500,000,000 over the next 10 to 15 years 3 . Attachment 

1, provided by the PUC, lists the current capital 
improvement projects totalling $226,332,545 for FY 1999- 
2000 and FY 2000-01 which are being funded by the 
Commercial Paper Program. According to Mr. Arnold, the 
proposed $100,000,000 expansion in the Commercial 
Paper Program, to increase it to $250,000,000, would 
permit complete funding of the full amount of the FY 
1999-2000 and FY 2000-01 Water Enterprise capital 
improvement program appropriation totaling 
$226,332,545, part of which is currently reserved by the 
Controller in the FY 2000-01 budget (see Comment No. 2). 

2. The current maximum authorized amount of the 
Commercial Paper Program is $150,000,000 of which 
$12,230,000 must be reserved for potential future interest 
payments, as required by the Letter of Credit. 
Consequently, the maximum amount of Commercial 
Paper that may currently be issued to fund the capital 
improvement program is $137,770,000. To date, as shown 
in Attachment I, the Board of Supervisors has 
appropriated a total of $226,332,545 in capital 
improvement projects to be funded by Water Revenue 
Bond proceeds. Since the funds appropriated for these 
capital projects totaling $226,332,545 exceed the 
authorized amount of the Commercial Paper Program less 
the required reserve for potential future interest 
payments ($137,770,000) by $88,562,545, the PUC and 
the Controller have jointly agreed to place a reserve of 
$89,300,000 on funding for the capital improvement 
program pending the availability of additional financing. 
The total funding reserve of $89,300,000 comprises (a) 
$18,875,000 reserved for FY 1999-2000 projects and (b) 
$70,425,000 reserved for FY 2000-01 projects. The project 



5 According to Mr. Arnold, this estimate is currently being reviewed. A more definite estimate 
(which is anticipated to remain above $3,000,000,000) is due to be finalized by the PUC in late 2000. 

BOARD OF SUPERVISORS 

BUDGET ANALYST 

41 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



appropriations affected by the funding reserve are listed 
in Attachment II, provided by the PUC. 

3. Mr. Arnold states that the PUC could finance a total of 
$88,562,545 in project appropriations by either (a) issuing 
up to $140,000,000 in Water Revenue Bonds, as 
authorized by the Board of Supervisors on May 17, 1999, 
or (b) increasing the authorized size of the Commercial 
Paper Program by $100,000,000. The latter option would 
increase the principal amount of Commercial Paper which 
could be issued to approximately $229,625,000 (allowing 
approximately $20,375,000 in reserve for potential future 
interest, as required by the Letter of Credit). According to 
Mr. Arnold, increasing the size of the Commercial Paper 
Program, rather than issuing Water Revenue Bonds, is 
judged by the PUC to be the more prudent financing 
strategy at this time, for the reasons outlined in 
Attachment III, provided by Mr. Bill Berry of the PUC. 
Mr. Berry states that "The lower costs associated with the 
commercial paper program when compared to bonds are 
primarily due to the flexibility to issue only the amount of 
debt that is needed to finance projects in progress. This 
flexibility reduces the amount of interest paid because 
less principal is outstanding." 

4. Based on the current relationship between 
Commercial Paper interest rates and 30-year Revenue 
Bond interest rates in California, Mr. Arnold estimated 
the following cost comparison of issuing on January 1, 
2001 either (a) Commercial Paper in the amount of 
$50,000,000 at 3.5 percent interest (the average interest 
rate for Commercial Paper in 2000), or (b) Water Revenue 
Bonds in the amount of $140,000,000 at 6 percent (the 
average interest rate for 30-year Revenue Bonds in 2000), 
without capitalizing the interest. 

Under scenario (a), there would be debt service costs of 
approximately $875,000 and additional Letter of Credit 
Costs of approximately $125,000, for a total cost of 
$1,000,000. If the full $50,000,000 in Commercial Paper 
was issued on January 1, 2000, and there was an average 
monthly pay-down of approximately $8,000,000 for the 
capital improvement program, there would be 6 percent 
interest on unspent Commercial Paper proceeds over the 

BOARD OF SUPERVISORS 

BUDGET ANALYST 

42 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



six month period in the amount of $750,000. Therefore, 
the net cost of scenario (a) would be approximately 
$250,000. 

Under scenario (b), there would be total debt service costs 
of $5,100,000. There would be 6 percent interest on 
unspent Water Revenue Bond proceeds over the six 
month period in the estimated amount of $2,200,000 (once 
again assuming that there is an average monthly pay- 
down of approximately $8,000,000 for the capital 
improvement program). Therefore, the net cost of 
scenario (b) would be approximately $2,900,000. 

While the above scenarios demonstrate that Commercial 
Paper can be cheaper financing tool than 30-year Revenue 
Bonds in the short term, Mr. Arnold emphasizes that the 
PUC is not advocating expansion of the Commercial 
Paper Program on the basis of potential short term 
savings since predicted interest rates may or may not be 
valid. Rather, the PUC is advocating expansion of the 
Commercial Paper Program on the basis that it is a more 
prudent financing tool for the reasons outlined in 
Attachment III. 

5. A Letter of Credit with a limit of $150,000,000 
presently costs the PUC $315,000 annually. By 
increasing the limit to $250,000,000, a Letter of Credit 
would cost the PUC $465,000 annually, an increase of 
$150,000 each year. Mr. Arnold states that this 
additional cost would be paid out of Commercial Paper 
proceeds. 

6. Although the proposed resolution would authorize a 
substantial expansion of the PUC's Commercial Paper 
Program, neither the underwriting team, the Issuing and 
Paying Agent, nor the banks providing the Letter of 
Credit were subject to new RFP or competitive bid 
processes. Mr. Arnold states that the PUC was advised 
by its independent financial advisors, a joint venture of 
Montague DeRose and Associates and Kitahata and 
Company, that the PUC had obtained a good financial 
package when it entered into contracts with Lehman 
Brothers and Lam Securities Investment, Inc., Chase 
Manhattan Bank, and Bayerische Landesbank 

BOARD OF SUPERVISORS 
BUDGET ANALYST 

43 



Memo to Finance and Labor Committee 

October 25, 2000 Finance and Labor Committee Meeting 



Gironzentrale and the State Street Bank and Trust 
Company. Mr. Arnold further states that the PUC can 
terminate any of the existing contracts if competitors offer 
better financial terms. 



Recommendation: 



7. According to Mr. Arnold, although Commercial Paper 
interest rates have averaged over 2 percent below 30-year 
Revenue Bond interest rates over the past ten years, 
there is no guarantee that this interest rate differential 
will continue in the future. Attachment III contains a 
discussion of the market risk associated with an increased 
Commercial Paper Program, and the risk management 
options available to the PUC. Mr. Arnold states that the 
PUC would cover the costs associated with repaying 
higher than expected Commercial Paper interest rates by 
selling Bonds earlier than it currently anticipates. 
However, the PUC reports in Attachment III that it has 
been issuing "commercial paper notes to provide short- 
term financing for these [capital improvement program] 
projects at a lower cost than would be available using 
fixed-rate long-term bonds" in large part due to the ability 
"to issue only the amount of debt that is needed to finance 
projects in progress." 

Approve the proposed resolution. 



Supervisor Yee 
Supervisor Bierman 
President Ammiano 
Clerk of the Board 
Controller 
Steve Kawa 




[arvey M. Rose 



BOARD OF SUPERVISORS 

BUDGET ANALYST 

44 



SFPUC Calendar Item Number: 

Department: Finance 

Project: Expansion of commercial paper 
program 



Attachment I 



SFPUC - Capital Project Appropriations, Prop "A" and "B" funds 



Prop "A" Projects 

CUW119 BDPL#1&2 -Trestle 

CU W 1 25 BDPL - Seismic Upgrade 

CUW127 SCADA System 

CUW131 SFWD - Intertie 

CUW1 35 New Line & By Pass 

CUW165 Equipment Anchorage 

CUW1 91 Fire/Security Upgrades 

CUW198 Stone Dam Rehabilitation 

CUW202 Replace Prestressed Pipe 

CUW226 BDPL Recoating 

CUW602 New Water Services/Meters 

CUW603 Relocate/Realign Services 

CUW624 Res. Roof Seismic Upgrade 

CUW628 Reservoir Rehabilitation 

CUW651 Pump Station Upgrades 

CUWS53 Stand by Generators 

CUW654 Seismic Upgrade North Basin 

CUW557 Balboa/Francisco 

CUW663 Key Motorized Valves 

CUW666 Clarendon Pump Station 

CUW672 Sutro Reservoir 

CUW860 Relocate/Realign Mains 

CUW870 Water Main Replacement 
Subtotal - Projects 

CUW797 CP Admin/Interest Expense 

Sub-total, Prop "A" Projects 

Prop "B" Projects 

CU W 1 34 S VWTP Fast Tracks 

CUW 1 43 HH Water Treatment 

CUW186 SVWTP Improvement Project 

CUW206 Tesla Portal/Thomas Shaft 

CUW21 8 Harry Tracy Improvements 

CUW222 WQ Compliance Improv. 

CUW223 Distribtion Sys. WQ Improv 

CUW632 Sutro Reservoir - Inlet/Outlet 

CUW668 Other Reservoirs - Inlet/Outlet 
Subtotal - Projects 

CUW797 CP Admin/Interest Expense 

Sub-total, Prop "B" Projects 

Grand Total 





FY99 


FY00 




Total 




B 


udget 


Budget 








S 


426,700 




$ 


426,700 




$ 


6,779,150 $ 


1,000,000 


$ 


7,779,150 




$ 


13,639.000 $ 


4,400,000 


$ 


18,039,000 




$ 


5,368,300 S 


3,000,000 


$ 


8,368,300 




$ 


1,200,000$' 


743,000 


$ 


1,943,000 




$ 


1,039,500 S 


2,000,000 


$ 


3,039,500 




$ 


1,407,000 S 


1,165,000 


$ 


2,572,000 




$ 


121,000 $ 


121,000 


$ 


242,000 




$ 


5,232,500 S 


5,500,000 


$ 


10,732,500 




s 


500,000 




$ 


500,000 




$ 


2,894,250 S 


3,050,000 


$ 


5,944,250 




$ 


223,800$ 


355,000 


$ 


578,800 




s 


2,500,000 $ 


9,500,000 


$ 


12,000,000 




$ 


1,500,000 $ 


4,000,000 


$ 


5,500,000 




s 


600,000 $ 


7,000,000 


$ 


7,600,000 




$ 


1,000,000 $ 


1,750,000 


$ 


2,750,000 




$ 


1,200,000 $ 


5,500,000 


$ 


6,700,000 




s 


300,000 




$ 


300,000 




$ 


1,800,000 $ 


300,000 


$ 


2,100,000 




$ 


4,000,000 




$ 


4,000,000 




$ 


4,000,000 $ 


1,000,000 


$ 


5,000,000 




$ 


160,500 $ 


420,000 


$ 


580,500 




s 


10,250,000 $ 


10,250,000 


$ 


20,500,000 




$ 


66,141,700 $ 


61,054,000 


$ 
$ 
$ 


127,195,700 




s 


1,125,000 $ 


3,742,700 


4,867,700 


$ 


67,266,700 $ 


64,796,700 


$ 
$ 


132,063,400 


s 


362,545 S 


1,706,000 


$ 


2,068,545 


s 


12,125,000 $ 


- 


$ 


12,125,000 


s 


35,200,000 $ 


13,900,000 


$ 


49,100,000 


s 


1 ,403,600 S 


2,850,000 


s 


4,253,600 


s 


5,000,000 $ 


4,900,000 


$ 


9,900,000 


s 


400,000 $ 


1,230,000 


$ 


1 ,630,000 


s 




$ 


850,000 


$ 


850,000 


s 


1 ,967,000 $ 


7,000,000 


$ 


8,967,000 


s 


2,000,000 $ 


3,000,000 


$ 


5,000,000 


s 


58,458,145 S 


35,436,000 


$ 
$ 

$ 


93,894,145 


s 


375,000 


35,436,000 


375,000 


s 


58,833,145 S 


$ 


94.269,145 


s 


126,099,845 $ 


100,232,700 


$ 


226.332.545 



45 



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16=45 



P.U.C. PURCHASING DEPT. 



Attachment III 
Page 1 of 4 



San Francisco Public Utilities Commission 

1155 Markat SL, A" Flocr. Sin Frandsco. CA 94101 • (415) 554-2457 • Fax (415} 554-3161 




CLtAM WATER 



Post-lr* Fax Note 



7671 



October 18, 2000 






Pfione# 
Faxf 



2S\- SHU 



From 

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Harvey M. Rose, Budget Analyst 

1390 Market Street . _^^ 

Suite 1025 ~~ 

San Francisco, CA 94102 

Dear Mr. Rose: 

I am writing to provide you with additional Information on the commercial paper program 
under the management of the San Francisco Public Utilities Commission (SFPUC). This 
information is being provided to assist your staff in evaluating the request by the SFPUC to 
increase the authorized size of the commercial paper program by $100 million to a total of 
$250 million. 

To date, a total of $226.3 million in capital projects have been approved by the Commission and 
the Board of Supervisors for funding under the 1997 $304 million Water Revenue Bond 
program. None of these bonds has been issued. Instead, the SFPUC has issued commercial 
paper notes to provide short-term financing for these projects at a lower interest cost than 
would be available using fixed-rate long-term bonds. The current authorized size of the SFPUC 
commercial paper program is $150 million. 

Since the funds appropriated for SFPUC capital projects exceed the authorized amount of the 
SFPUC commercial paper program, the SFPUC Finance staff and the Controller have agreed to 
place a reserve of $89.3 million on funding for Water Enterprise capital projects pending the 
availability of additional Financing. 

The SFPUC has two options available to provide additional financing for the capital projects in 
the 1997 Water Revenue Bond program. The implementation of either of these options would 
result in the release of the reserve the Controller has placed on the SFPUC capital budget. These 
options are outlined below: 

Revenue Bond Option; The Board of Supervisors has authorized the SFPUC to issue up 
to $140 million in revenue bonds to finance capital improvement projects approved 
under Propositions A and B in 1997. If these bonds were sold, the bond proceeds plus 
the total authorized size of the commercial paper program would exceed the $226.3 
million in appropriations for projects funded under Propositions A and B and the 
Controller's $89.3 million reserve would be lifted. 

Commercial Paper Option; An increase In the authorized size of the commercial paper 
program by $100 million would allow the Controller to release the reserve on SFPUC 
capital project funding. The total amount of the expanded program (including required 
reserves) would be $250 million. The amount of principal which could be issued under 
this expanded program would be approximately $228 million which would be sufficient 
to fully cover the $226.3 million of capital appropriations. 



47 



ocT-ia-20ea 16:45 p.u.c. purchasing dept. _— n — r— 7 : 

Pa°e z or 4 

• SFPUC Commeroal Paper Expansion - 2 - October 18, 2000 

Cost Comparison (bonds vs. commercial paper) 

The costs to the SFPUC of issuing commercial paper are quite different from the costs of issuing 
long-term revenue bonds. A revenue bond Issue of $140 million under current market 
conditions (approximately 6 percent interest for 30-year bonds) would have an annual debt 
service requirement of approximately $10.2 million. It is common practice to capitalize interest 
for the first year or two of a bond sale to finance construction. Capitalized interest for two years 
on a G percent $140 million bond issue would amount to $8.4 million each year. These interest 
expenses would be deducted from the bond proceeds before the establishment of the 
construction fund. 

Commercial paper provides an alternative to capitalized Interest from bond proceeds. The total 
costs of Issuance and interest for the SFPUC commercial paper program during its first year of 
operation have been approximately $1 million. The lower costs associated with the commercial 
paper program when compared to bonds are primarily due to the flexibility to issue only the 
amount of debt that is needed to finance projects in progress. This flexibility reduces the 
amount of interest paid because less principal is outstanding. As the amount of commercial 
paper outstanding increases, the cost differential for Interest between commercial paper and 
bonds decreases. However, over the past ten years, short-term interest rates have averaged 
more than two percent below long-term interest rates. This rate differential produces savings in 
interest costs even If the principal outstanding is the same. 

INVESTMENT EARNINGS 

The cost comparisons above do not take earnings on invested bond or commercial paper 
proceeds into account. Over the last year, the SFPUC earned $778,926 from invested 
commercial paper proceeds. These interest earnings compare to interest payments of $505,890 
during the same period. Under the Internal Revenue Code, it is permissible for an issuer to earn 
interest on debt proceeds in excess of the bond or commercial paper Interest rate provided that 
certain spending tests are met. The SFPUC has successfully met the spending tests for the 
commercial program, but would not have met the tests had it issued fixed-rate bonds. In that 
case, the SFPUC would have been required to rebate excess earnings to the federal 
government. The SFPUC currently has a rebate obligation of $495,882 In connection with a 
1996 issue of Water Revenue Bonds. 

Market Risk and Risk management Options 

Although short-term Interest rates have averaged over two percentage points below long-term 
interest rates over the past ten years, there is no guarantee that this interest rate differential 
will continue in the future. Furthermore, long-term interest rates fluctuate over time. The I 

current thirty-year bond rate (5.75 percent as of October 17, 2000) is approximately the same ' 

as the thirty-year bond rate at this same time last year. However, dunng the past year long- 
term bond rates have risen as high as 6.35 percent and short-term Interest rates have 
exceeded 4 percent from time to time. The SFPUC will ultimately refinance outstanding 
commercial paper by issuing long-term bonds. If the interest rate on fixed-rate long-term bonds 
significantly exceeds current rates, it is possible the SFPUC will pay higher interest costs over 
the life of the bond issue than would have been the case had the SFPUC issued long-term bonds 
initially. § 

This is a risk borne by many issuers of commercial paper in both the taxable and tax-exempt 
markets, and there are several options for managing such risk. One way to mitigate interest | 
rate risk is to pursue refinancing opportunities in the future. Another option Is to Issue long- 
term variable rate bonds rather than fixed-rate bonds. Variable rate bonds have interest rates in 
the same range as commercial paper, and have demonstrated remarkable stability over many 
years. Such bonds could be issued on a long-term basis, or as an intermediate-term measure 
until long-term rates again approach reasonable levels. The SFPUC could also purchase interest | 

I 



48 



OCT-1S-2000 16:45 P.U.C. PURCHASING DEPT. Attachment III 

Page 3 or 4 
' SFPUC Commercial Paper Expansion - 3 - October 18, 2000 

caps to limit the upside risk on an issue of variable rate demand bonds. Use of an interest rate 
cap In connection with the commercial paper program itself Is not appropriate because It will 
cost more than the savings achieved by using the program. It will also not protect against the 
possibility that long-term Interest rates may be higher than desirable when the commercial 
paper should be refinanced. 

There are many other possible risk-mitigation strategies. Staff has not found it possible to craft 
rules or an exit strategy to eliminate or mitigate risk, other than active management by SFPUC 
and Mayor's Office of Public Finance staff and the SFPUC's financial advisors. However, we 
believe history has shown that sole reliance on fixed-rate long-term bonds is more costly than 
use of appropriate amounts of short-term and variable rate debt combined with careful, active 
management. 

In addition to the factors described above, It Is useful to keep the following factors in mind 
when considering market risk: 

1. This risk exists for all SFPUC financing, including bond Issues, it is always 
possible, with hindsight, to pick a date when the issuance of debt would have 
saved money. 

2. While it is possible for interest rates to increase, It Is also possible that the 
interest rate on w take-out" bonds will be lower than current long-term rates 
resulting in lower costs for the SFPUC. 

3. Given the size of the SFPUC's capital Improvement program, the SFPUC will be 
issuing over $125 million In bonds annually for the foreseeable future; therefore, 
the SFPUC will likely need to issue bonds at times when rates are higher than 
current rates. Commercial paper rates can reasonably be expected to be 
significantly lower than long-term bonds at the time of each issuance, making it 
desirable to keep a portion of our debt in commercial paper even if rates rise. 

Comparable Programs 

Commercial paper was first developed in the 1800's, and has been widely used by U.S. 
corporations (approximately $1.1 trillion outstanding at the end of 1998). The tax-exempt 
commercial paper market was established more recently, but has attracted widespread use. The 
total amount of authorized tax-exempt commercial paper is close to $100 billion. Commercial 
paper is especially attractive to state governments for cash flow financing and issuers with large 
capital programs, Including water, wastewater and electric utilities. 

The State of California has used commercial paper for several years. The current authorized 
amount is $1.5 billion. In the City and County, the Airport Commission and Board of 
Supervisors have authorized the issuance of up to $400 million in commercial paper by the San | 
Francisco Airport, with approximately $270 million currently outstanding. | 

l 
? 



49 



OCT-18-2000 16: 46 P.U.C. PURCHASING DEPT. 

SFPUC Commercial Paper Expansion - 4 - 



Attachment III 
Page k of k 
October 18, 2000 



The following table provides the most recent available information regarding Commercial Paper 
Programs established by the SFPUC and comparable California governmental agencies: 



Comparable Commercial Paper Programs 

($000) 



Authorized 
Commercial Paper Issuer CP Issued Amount 



San Francisco Airport 
LA Dept of Water & Power 
Metropolitan Water Dist Of So. Cal. 
Los Angeles Wastewater 
East Bay Municipal Utility District 
San Diego Co. Water Authority 
CaTrfomia Dept of Water Resources 
Sacramento Muni. Utility Dist 
San Francisco PUC 



270,000 


400,000 


NA 


400.000 


350.000 


400,000 


NA 


400.000 


142,000 


250.000 


70.000 


250,000 


28,117 


244.000 


172.900 


177,200 


41,000 


150,000 



Various sources. 



If I can provide you with any additional information in this matter, please contact me at 554- 
2457 or Phil Arnold at 487-5255. 

Sincerely, 

Bill Berry / 

Assistant General Manager for 
Finance and Administration 



50 



3 



TOTAL P. 34